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States, tribes and industry clash over who should regulate prediction markets
Summary
The hearing highlighted legal disagreement over whether the CFTC may allow event contracts that resemble sports bets and whether Congress should act to protect state and tribal gaming authority; witnesses and senators cited ongoing litigation and attorneys general letters.
Lawmakers used the subcommittee hearing to press competing claims about the proper regulator for prediction‑market event contracts and how federal authority interacts with state and tribal gaming regimes.
Industry witnesses, represented by former Congressman Patrick McHenry, said prediction markets are swaps overseen by the Commodity Futures Trading Commission and operate on an exchange model with federal surveillance, AML and know‑your‑customer requirements. McHenry told senators coalition members are subject to federal regulation and that members have surveillance and ban lists for prohibited patrons.
State regulators and tribal gaming proponents pushed back. Bill Miller of the American Gaming Association and other witnesses said prediction markets are operating like national sportsbooks while avoiding the licensing, age restrictions and auditing required of state and tribal operators. Senators and witnesses noted multiple lawsuits brought by tribes against prediction‑market companies and said 41 state attorneys general had asked the CFTC to stop approving certain contracts.
Senators probed the CFTC's current self‑certification process for new contracts and whether the commission has handled similar products before. Some committee members argued that the CFTC lacks sufficient experience with sports betting; others said courts (including a Third Circuit decision) have given prediction markets some capacity to offer event contracts under current law. Several senators urged Congress to clarify whether sports event contracts fall outside the CFTC's remit to preserve state and tribal regulatory authority.
The exchange addressed potential remedies: congressional reaffirmation of state/tribal authority, federal minimum safety standards that preserve state flexibility, or clearer CFTC rulemaking. Witnesses differed on optimal solutions, making legislative follow‑up likely.
