Why Tribes See the CLARITY Act as a Back Door for Prediction Markets

For most of the past year, tribal gaming's prediction-market problem had a single name: Kalshi. Tribes sued, regulators wavered, and courts split over whether sports event contracts traded on federally regulated exchanges amount to wagering that violates tribal exclusivity. Now tribal leaders are warning that the bigger threat may arrive through a different door entirely — a cryptocurrency bill. The CLARITY Act and tribal gaming have collided, and the Indian Gaming Association is treating the collision as a five-alarm fire.

The CLARITY Act is Congress's attempt to build a permanent regulatory framework for digital assets, sorting tokens and platforms between the Securities and Exchange Commission and the Commodity Futures Trading Commission. On its face it has nothing to do with casinos. But tribal gaming leaders argue that, as drafted, the bill could cement the legal foundation under prediction markets — entrenching the CFTC as the de facto national gaming regulator without Congress ever debating gambling policy.

How a crypto bill becomes a gaming bill

The mechanism is indirect but powerful. Prediction-market operators offer sports and event contracts under CFTC oversight, claiming those products are derivatives, not bets — and therefore exempt from state gaming law, the Wire Act, and tribal-state compacts alike. Every statutory provision that strengthens or formalizes CFTC jurisdiction over event-style contracts makes that argument harder to dislodge. Tribal advocates fear the CLARITY Act would do exactly that: legalize prediction markets through the back door, without the established gaming regulatory process ever being engaged.

The Indian Gaming Association has said it will push for explicit carve-outs or clarifying language before the bill advances. In mid-May, the IGA joined the American Gaming Association in a letter urging Congress to make clear that prediction platforms cannot offer nationwide sports betting and casino-style gambling as federally regulated financial products. It is a rare moment of full alignment between commercial and tribal gaming — both built their businesses inside state-by-state regulatory walls that event contracts simply walk around.

The scale of what is at stake explains the urgency. Prediction-market volumes on sports contracts have grown explosively since federal courts began allowing them to operate pending litigation, and analysts at institutions as cautious as Brookings have described the boom as an existential threat to American Indian gaming. Unlike a competing casino across a state line, a federally sanctioned exchange is available on every phone in every state — including states where tribes paid heavily, in revenue share and political capital, for the exclusive right to offer the same economic activity under a different legal label.

Why tribes have the most to lose

For commercial operators, prediction markets are a competitor with a regulatory cost advantage. For tribes, they are something closer to an existential question. Tribal gaming rests on a bargain codified in the Indian Gaming Regulatory Act: tribes get exclusive rights within negotiated scopes, and states get revenue sharing and regulatory roles in return. A nationwide, app-based wagering product that answers only to a federal financial regulator dissolves that bargain from the outside. If sports wagering can be repackaged as a swap, exclusivity clauses — the consideration tribes paid compacts to obtain — lose their meaning, along with the revenue-share payments states collect on top of them.

The litigation record so far is mixed. Tribes in New Mexico have sued Kalshi under IGRA, arguing event contracts on tribal-exclusive games are unlawful, while a federal court in Wisconsin handed the Ho-Chunk Nation a notable ruling in its own confrontation with the exchange — see our coverage of the Wisconsin decision. But litigation under existing law is precisely what a new statute can moot. A favorable IGRA precedent is worth little if Congress subsequently ratifies the financial-product theory in a market-structure bill.

The legislative endgame

Tribal advocates are asking for something simple: language stating that nothing in the CLARITY Act authorizes event contracts on sports or gaming outcomes, or that such contracts remain subject to gambling law. Bill sponsors, focused on crypto market structure, have little appetite for importing a gambling fight into an already contentious package — which is exactly what worries the IGA. Provisions that nobody fights over are the ones that pass.

The deeper issue, as we explored in our earlier analysis of prediction markets and IGRA exclusivity, is that the federal government has never had to reconcile its financial and gaming regulatory regimes. The CLARITY Act forces the question, whether Congress intends it or not. Tribes learned through the compact era that silence in federal statutes gets resolved against them as often as not; the frameworks at stake are summarized in our Legal Guide.

The bill's timeline remains fluid, and gaming carve-out language has been floated but not secured. What is already clear is the strategic shift: tribal gaming's defense of exclusivity has moved from courtrooms and state capitols to the congressional committees writing crypto law. It is an unfamiliar battlefield, with counterparties — exchanges, token issuers, fintech lobbies — that have never sat across from a tribal government. How effectively Indian Country adapts to that arena may matter more to the next decade of tribal gaming revenue than any single court ruling.