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The U.S. gaming industry is escalating its fight against prediction markets, urging Congress to step in before sports-based event contracts become more widespread. In a joint letter to lawmakers, the American Gaming Association and the Indian Gaming Association called for swift legislative action to shut down what they describe as unregulated sports betting disguised as financial products.
The message comes at a pivotal moment. Congress is actively working on legislation to reform the cryptocurrency market structure, which gaming groups view as the most realistic opportunity to clarify that sports wagering should not be permitted through federally registered prediction markets.
Sports event contracts and the regulatory gray area
At issue are sports event contracts that allow users to trade on game outcomes, player performance or multileg combinations that closely resemble parlays. These contracts are offered on platforms regulated by the Commodity Futures Trading Commission, yet they operate very differently from state-licensed sportsbooks.
Gaming groups argue the distinction is largely semantic. From a consumer perspective, placing money on whether a team wins or loses feels no different from making a traditional sports bet. The key difference lies in oversight: sportsbooks must comply with strict state and tribal regulations, while prediction markets can release contracts nationwide through self-certification. According to the letter, that gap creates serious consumer protection concerns.
The CFTC’s rules technically prohibit event contracts tied to gaming, war or unlawful activities. Despite that, sports-related contracts have expanded rapidly. The agency’s self-certification process allows products to launch unless regulators intervene — something gaming groups argue has not happened often enough. CFTC Chairman Michael Selig has said the agency will not aggressively rein in sports contracts while litigation plays out and will follow congressional direction, placing the spotlight squarely on lawmakers.
Tribal compacts and state rights threatened
Since the Supreme Court overturned PASPA in 2018, states and tribes have controlled how sports betting is legalized and regulated. Many states spent years building frameworks that include licensing requirements, age restrictions, integrity monitoring and responsible gaming tools.
Prediction markets bypass that process entirely. Sports contracts are often available in all 50 states to users as young as 18, regardless of local laws. Gaming advocates say this undermines voter-approved systems, tribal compacts and long-standing agreements that grant tribes exclusive rights to offer certain gaming products.
The financial impact is significant. States and tribes rely on sports betting revenue to fund schools, infrastructure and public safety programs. Gaming groups warn that unregulated national platforms could erode that revenue stream.
Nevada emerges as legal battleground
Nevada has become the focal point of the legal battle. State regulators concluded that Kalshi’s sports contracts constituted unlicensed sports wagering. That determination triggered lawsuits, injunctions and an ongoing appeal that could influence national policy.
Other platforms chose to withdraw from Nevada rather than fight. Kalshi remained, turning the state into a proving ground for where prediction markets end and sports betting begins.
Sensitive event contracts threaten public trust
The AGA and IGA also point to contracts tied to geopolitical conflicts and other sensitive events. Those products, they argue, would never be allowed under state or tribal gaming laws and risk damaging public trust.
With crypto legislation moving forward, the gaming industry is pressing Congress to act. The outcome could define the future boundaries between regulated betting and financial markets for years to come.
