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« This is an interesting time in federalism. »
When Professor Stephen Light said this in a recent interview with ReadWrite, it landed with weight. He sat next to fellow professor Kathryn Rand, his longtime collaborator on tribal gaming law and co-author of Indian Gaming Law and Policy, and the two talked about a shift that felt both sudden and far-reaching. Prediction markets, once a niche corner of finance, are now entering the space long defined by tribal and state gaming systems.
The platforms allow users to trade contracts on the outcome of real-world events, from sports games to elections, in ways that can closely resemble traditional betting. However, they raise new questions about sovereignty, regulation and who really controls the rules.
That tension was hard to miss at the Indian Gaming Association trade show and convention last week. Tribal leaders, regulators and industry voices gathered as legal disputes continue to intensify and uncertainty grows.
« Today, our Board took decisive action to protect what generations before us fought to build, » IGA Chairman David Z. Bean said at the conference. « These so-called prediction markets are an attempt to circumvent tribal authority and recast gambling as a financial product. We will not allow this. We will stand united to protect tribal sovereignty and the integrity of Indian gaming. »
The expansion of federally regulated event-based trading platforms has become one of the most pressing issues in Indian Country. Prediction markets are seen circumventing the very frameworks that tribes have spent decades building and protecting, including IGRA contracts and recent victories against lottery-style operators.
Prediction markets pose a growing challenge to established Indian tribal gaming frameworks
For Rand, who is a visiting professor at Boyd Law, the concern is immediate. « I think it’s fair to say that prediction markets are a threat to tribal gaming, » she said. This is directly related to the Indian Gaming Regulation Act, the 1988 law that shaped modern tribal gaming. IGRA depends on a shared system in which states and tribes negotiate treaties that govern operations and revenues.
If we assume that prediction markets are effectively a game, then they work in a way to remove this governmental power from both states and tribes.
Professor Catherine Rand
In this case, prediction markets may fall outside this system entirely.
« If we accept that the prediction markets are effectively a game, » Rand explained, « then they operate in a way to remove that governmental power from both the states and the tribes. » In practice, federally regulated platforms, primarily overseen by the Commodity Futures Trading Commission (CFTC), could offer products that look and feel like sports betting, without following the same rules or contributing to the same revenue structures.
From the CFTC’s perspective, prediction markets fall within existing derivatives law, offering a regulated alternative to offshore betting and potentially improving market efficiency by gathering information about future events. This may help explain why federal authorities have been more willing to impose jurisdiction even when states and tribes push back.
And we’ve seen this play out in recent days, after we reported that the CFTC and the Department of Justice were taking legal action against states like Arizona, Illinois, and Connecticut for trying to curb prediction markets. This indicates a more aggressive federal stance in an area traditionally controlled at the state and tribal levels.
Light sees this as a potential crack in what he and Rand have long called the « casino compromise, » the balance created by IGRA between tribal sovereignty, state oversight and commercial interests. « This balance has largely been maintained over the past few decades, » he said. « We don’t want to be apocalyptic about it, but it’s true that they are a present, immediate and real threat that the tribes are looking at that balance. »
The stakes extend far beyond legal theory. Tribal gaming remains the primary economic driver for many tribal governments, supporting essential services such as health care, housing, education and public safety. As Rand said, « most tribes have gaming as their primary economic driver and job creator in a relatively limited economy. »
Economic impact and increasing federal pressure
The financial importance of this system is clear in places like Arizona. Tribal casinos there contributed $33.4 million to the state’s compensation fund in the third quarter of fiscal 2026 alone, an 8.3 percent increase over the previous year. These funds go into education, emergency services, wildlife conservation, tourism and programs targeting problem gambling.
Since 2004, total Arizona tribal gaming contributions have reached approximately $2.5 billion, demonstrating a long-standing partnership between the tribes and the state.
The majority of tribes will not be able to simply turn to another equally effective path of economic development.
Professor Catherine Rand
In this context, the timing of federal action stands out. Just days after Arizona reported its latest contribution figures, it became the target of a federal legal challenge related to prediction markets. For many tribal stakeholders, the overlap reinforces a growing concern that a stable, highly regulated system is now being challenged by a newer market operating under a different set of rules.
« The majority of tribes will not be able to simply turn to another equally effective path of economic development, » Rand warned. If prediction markets hijack consumers without sharing revenue obligations, the long-term consequences could be significant.
The ongoing debate centers on whether prediction markets are considered gambling.
« Public policy, to some extent, determines how we define what gambling is, » Rand said. If these platforms fall outside this definition, they could avoid safeguards designed to ensure fairness, prevent the participation of minors and limit problem gambling.
However, from the user’s point of view, the difference is not always obvious. Contracts related to sports, election or entertainment outcomes are often conducted in ways that are « very similar, if not identical, to sports betting, » Rand noted.
Light continues this idea by pointing out how quickly the range is expanding. « What it does is open up a new space, » he said, where people can bet on everything from prizes to political events — areas that have historically been outside of regulated gaming.
Regulation of the prediction market is struggling to keep up with the ongoing changes
This isn’t the first disruption to tribal games. In recent years, tribes have successfully resisted lottery-style operators who sought to exploit gray areas, which often relied on alliances between tribes, states and commercial operators, with a shared focus on consumer protection.
Rand believes a similar approach could emerge again. « This is an opportunity for states and tribes … to find common ground, » she said, particularly around fairness and consumer safety.
But prediction markets are a tougher challenge because they come with federal backing, at least in part, complicating enforcement and raising deeper jurisdictional questions.
« It’s extremely difficult to legislate in the face of technology, » Light said, comparing the moment to previous debates over online poker and digital gaming. Innovation has always moved faster than regulation, but the current pace feels different.
« The suddenness with which prediction markets have emerged in the last year or so, » noted Light, along with strong adoption among younger consumers, has created a situation where regulators are scrambling to catch up.
For tribes already moving to mobile betting and iGaming, this adds another layer of uncertainty. « Prediction markets are probably pulling the rug out from this process, » Rand said. Years of negotiations and investment related to mobile betting frameworks could be undermined by a parallel system that operates outside of these agreements.
The dispute is now unfolding on several fronts. Tribal organizations have filed amicus briefs against platforms like Kalshi. Lawmakers are introducing bipartisan bills to clarify regulators. Members of Congress also question whether the current proposals are consistent with federal law, although enforcement remains patchy.
For Light, the problem reaches beyond the games to the broader balance of power in the US system. « This is consistent with … an assertion of federal authority, » he said, describing the recent action as « a new ground » in how power is divided between federal, state and tribal governments.
Rand shares this concern and questions the policy rationale behind the federal approach. « There doesn’t seem to be a clear public policy to support the federal position on this issue, » she said, especially compared to the established goals behind tribal and state gaming systems.
These goals – economic development, consumer protection and sovereignty – remain central. Tribal games have long been a basis for self-determination and governance.
« If we have a threat to that revenue stream, that’s significant, » Rand said. The consequences go beyond self-control dollars. If prediction markets can operate outside of tribal jurisdiction, it raises broader questions about what comes next.
« It also suggests that there may be other activities … that tribes simply won’t have control over, » she added.
Looking ahead, both Rand and Light expect the conflict to intensify. Court battles are likely to continue, and the issue may eventually reach the Supreme Court as competing interpretations of federal power collide.
For now, prediction markets are growing rapidly, federal agencies are establishing their roles, and tribes are weighing how best to respond.
This is consistent with the current administration’s general approach to federalism today, which has almost turned the last few decades of federalism on its head, where conservatism (the small « c ») in the US and Republicans (the big « R ») in the US were oriented toward returning power back to the states and therefore often to the tribes for their benefit.
Professor Stephen Light
Light’s opening comment captures the moment. What is happening appears to be a tipping point that could redefine how tribal sovereignty functions in the digital economy, where even the definition of gaming is changing.
And as both scientists make clear, the stakes are real. They affect the economic stability, legal authority, and future self-determination of tribal nations.
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