If it seems like the federal government is at odds with itself when it comes to Indian Gaming, that’s because it currently is. In 1988, Congress crafted the Indian Gaming Regulatory Act (IGRA), which made Class III gaming — which includes house-banked card games, craps, roulette, and now sports betting — the exclusive purview of the 500-plus federally recognized tribes in the U.S.
But four months ago, prediction market Kalshi filed a submission with the Commodity Futures Trading Commission (CFTC) to begin offering “will win” contracts. By the Super Bowl in February, Kalshi was taking tens of millions of dollars in bets on sporting events.
In states where sports betting is not legal.
On tribal reservations.
And in states, like Florida and Washington, where tribes offer live sports betting, and have agreements with their states for complete monopolies on gaming.
Since Kalshi self-certified to offer such contracts, Indian Country has taken notice. When the CFTC planned an April 30 roundtable to address prediction markets, the lion’s share of public comments came from tribal interests. The roundtable was canceled, but some tribal groups were invited to a conference call set for this Thursday. No one knows what to expect from the call, though participants on Wednesday’s “The New Normal: Tribal Sovereignty and Prediction Markets — Inside Thursday’s CFTC Call” webinar were less than enthusiastic.
“There’s not much information,” Bradley Bledsoe Downes of Bledsoe Downes, PC said. “And if you look at the impending resignations [at the CFTC], including the acting chair, I just think there won’t be much other than a clearing of the cupboards. At best, I think this is a courtesy after canceling the roundtable that was going to be in the public and we get a private call with a commission that really won’t be able to act.”
Indian Country is also planning its own educational session through the National Congress of American Indians, which will meet at Foxwoods on the Mashantucket Pequot reservation in Connecticut June 10.
Sovereignty, exclusivity at risk
How tribes will manage this latest threat to their sovereignty and exclusivity is unclear, but what is certain is that tribes across the country believe their exclusivity is at risk. And because of that they fear for their future. IGRA, wrote former U.S. Bureau of Indian Affairs Assistant Secretary Byran Newland, spawned the single most meaningful economic engine in Indian Country in a generation. The document that spans 15 pages in a 37-year-old federal register gave tribes a way out of poverty.
“The tribal gaming industry has been the most successful economic development in Indian country in my lifetime,” he wrote on Yahoo! News May 8. “Over the past four and a half decades, it has lifted entire communities out of crushing poverty and conferred economic and political power to Indian people for the first time in generations.”
Many tribes across the U.S. have compacted for exclusivity for Class III gambling with their states. Negotiations in some cases have been drawn out, contentious, and frustrating. But the net result is power that tribes across the nation protect fiercely.
“Why isn’t everyone up in arms about what [tribes] had to go through [to get exclusivity]?” asked Mashantucket Pequot Tribal Chairman Rodney Butler on the webinar. “Through this loophole, someone can just come into our markets and usurp this. We have leverage in Connecticut, between us and the Mohegans we’re paying several hundred millions to the state.”
Butler said that should it come to it, the tribes could stop making the payments. Florida’s Seminole Tribe stopped paying a $500 million revenue share to the state in 2019 over a disagreement about house-banked card games.
“Every tribe doesn’t have that [luxury],” Butler said. “But do they [Kalshi] just get a pass? … They are taking advantage of the chaos that is going on and they are flying under the radar and taking away from the tax dollars” from tribes and states.
What is IGRA?
The Indian Gaming Regulatory Act grants any federally recognized Indian tribe the right to offer Class III gaming on its lands with state approval. However, it is not the end-all, be-all that many make it out to be. Tribes retain sovereignty and enjoy exclusivity, but it is critical to note that they only do with approval of their states.
With regard to legal sports betting, tribes in only a handful of states have been able to fully maintain exclusivity — among them, tribes in Florida, New Mexico, Washington, and Wisconsin. Of those, only the Florida Seminoles can offer statewide digital sports betting with no competition.
Tribes in Arizona share their exclusivity with professional sports teams, tribes in Michigan share their exclusivity with three commercial casinos, and tribes in Connecticut allow the state lottery access to sports betting.
At issue as sports betting becomes more prolific is whether IGRA allows for statewide digital sports betting. The Bureau of Indian Affairs, which is tasked with interpreting and developing rules around IGRA, in 2024 published an updated set of rules that allows for tribes to maintain exclusivity and offer statewide digital sports betting if their home state agrees. That is the setup in Florida, where any bet taken anywhere in the state is considered to be made on Indian land if it flows through a tribal server. This update was critical to Indian Country, and will play a key role when California’s Indian Country eventually legalizes. It’s also at the heart of a lawsuit in Colorado, where two tribes there say the state isn’t willing to honor their exclusivity and is preventing them from offering digital betting.
As written into the text of IGRA, the goal of the law is to “promote tribal economic development, tribal self-sufficiency, and strong tribal government.” To that end, should a tribe decide to partner with a commercial operator for gaming under IGRA, the tribe is mandated to receive at least 60% of net revenue, and tribal gaming is regulated by a tribal council rather than a state regulatory agency. These provisions are only in place for digital sports betting in Florida. In all other tribal states that offer digital sports betting, the tribes are regulated by and pay taxes to the state.
What is the CEA?
The CFTC is a government agency that was founded to implement the Commodity Exchange Act, a 1936 law that traces its roots to the 1922 Grain Futures Act. The CEA was, at least initially, designed to set a framework for traditional commodities trading — pork bellies, oranges, and the like, as highlighted in the 1983 film Trading Places, in which a scheme to falsely inflate the price of concentrated orange-juice futures changes the lives of the key players. The film, said Indian Gaming Association Executive Director Jason Giles, “makes about as much sense of this as anything” in referring to the agency now regulating sports event contracts in addition to things like peanuts and Irish potatoes.
The CEA defines a commodity as such:
Wheat, cotton, rice, corn, oats, barley, rye, flaxseed, grain sorghums, mill feeds, butter, eggs, Solanum tuberosum (Irish potatoes), wool, wool tops, fats and oils (including lard, tallow, cottonseed oil, peanut oil, soybean oil, and all other fats and oils), cottonseed meal, cottonseed, peanuts, soybeans, soybean meal, livestock, livestock products, and frozen concentrated orange juice, and all other goods and articles, except onions (as provided by section 13–1 of this title) and motion picture box office receipts (or any index, measure, value, or data related to such receipts), and all services, rights, and interests (except motion picture box office receipts, or any index, measure, value or data related to such receipts) in which contracts for future delivery are presently or in the future dealt in.
CEA section 5c(c)(5)(C)(ii) “provides that no agreement, contract or transaction determined by the Commission to be contrary to the public interest” be listed or offered for trading. The CFTC in Rule 40.11 further clarifies that “An agreement, contract, transaction, or swap based upon an excluded commodity, as defined in Section 1a(19)(iv) of the Act, that involves, relates to, or references terrorism, assassination, war, gaming, or an activity that is unlawful under any State or Federal law” is prohibited.
Which law or rule is right?
The question is: Which law takes precedence? Independent of the IGRA question, federal courts in Maryland, Nevada, and New Jersey are currently considering whether or not Kalshi, the prediction-market platform that in January self-certified to offer contract on results of sports events, should be allowed to do so. So far, Kalshi has been “winning” in court, or at least being given the right to continue offering its products as lawsuits move forward. Courts in Nevada and New Jersey have granted preliminary injunctions to be able to continue to operate.
Bledsoe said during the webinar that CFTC-approved entities can self-certify for new offerings, and that the agency has 10 days to respond should it want to put the certification on hold.
“The entities can then offer it and there is an emboldened group of entities that are trying to have these traded,” he said. “And they are saying because they are approved that the CFTC, that preempts state law. … It does upset carefully crafted state-tribal compacts.”
Many stakeholders see the approval of prediction markets — which are not held to the same rigorous state laws and regulations as traditional digital sportsbooks — as an existential threat to the existing industry. At this point in time, states and tribes are both fighting for sovereignty while Kalshi — through the CFTC — is fighting for a way in.
If the courts find that the CEA overrides state law, then so, too, must IGRA. Both are federal laws. But the question of which federal law supercedes the other is the real question, as it does not appear that there is a way the two can co-exist in their current forms.
Joseph H. Webster, managing partner at Hobbs, Straus, Dean & Walker, LLP said on The New Normal that Kalshi has argued in some state courts that sports betting “isn’t covered by IGRA, and even if it is” the CFTC regulations trump that. “The bottom line,” he said, “is there is a conflict between what the CEA allows and IGRA allowing exclusive right to gaming on Indian lands.”
One question for the courts seems to be to determine whether or not event contracts fit the definition of gaming.
“If it’s gaming, they’re violating tribal laws, and if it’s not gaming, then why are we following IGRA at all?” Newland said on a May 14 edition of The New Normal. “That’s what’s at the core of this whole thing.”
So far, Kalshi has successfully argued that its sports event contract offerings are not gaming and do not violate the CEA.
Is there a way in for tribes?
Last week, Sporttrade founder Alex Kane offered a glimpse of how Indian Country and prediction markets could work together. Kane’s company four years ago debuted an exchange platform, but regulators across the U.S. have not embraced the concept. Since Kalshi launched sports event contracts — and now Robinhood partners with Kalshi to offer them, too — the landscape has become more fluid. Sporttrade, licensed in five states, is now also pursuing a certification through the CFTC.
On the New Normal weekly webinar May 21, host and Indian Gaming Association Conference Chair Victor Rocha told Kane, “We don’t hate everything we see. We’ve just had a bad experience with people telling us ‘this is how it’s supposed to be.'”
During the discussion, Kane offered up a compromise of sorts — a possible way for the tribes to participate without compromising their sovereignty. Kane said that within the structure of the prediction markets, there is an opportunity for any entity to become a “Futures Commissions Merchant” (FCM), which is an intermediary between a customer and a “Designated Contract Market” (DCM). Basically, the FCM would funnel orders from its own customers to a DCM partner. In this way, tribes could keep control of their customers while participating in the prediction market with no risk.
Kane hopes the tribes view that as an avenue worth exploring. But for the time being, Indian Country is still asking questions, researching, and keeping a firm grip on its key goals — protecting sovereignty and exclusivity.
