Senators are pushing to preserve state and tribal authority over sports betting as Congress considers changes to the Clarity Act, a proposed federal cryptocurrency market-structure bill.
At a Senate Indian Affairs Committee roundtable on Tuesday, Indian Gaming Association Vice Chairman Tehassi Hill called for prediction markets linked to sports and casino events to remain governed by state and tribal gaming laws. He argued they should not fall solely under the oversight of the US Commodity Futures Trading Commission (CFTC).
The debate comes as the Senate attempts to advance the Clarity Act before lawmakers leave Washington for the August recess. The chamber has limited legislative time remaining before attention shifts towards the November elections.
Supporters of the proposed changes believe the crypto market-structure bill could provide a way to define the CFTC’s authority over prediction markets more clearly.
Hill urged Congress to amend the legislation so it explicitly prevents “sports and casino gambling through prediction markets” from bypassing existing gaming regulations.
He said the bill should establish that state gaming laws and the Indian Gaming Regulatory Act take precedence over federal commodities legislation in governing those markets. Tribal gaming organisations have warned that wider federal intervention could undermine state and tribal control of sports wagering, an area traditionally regulated locally.
Sen. Tina Smith, D-Minn., said later in the hearing that similar wording could be added either to the Clarity Act or the Farm Bill. Congress often uses the Farm Bill to carry broader policy measures that extend beyond agriculture.
The dispute reflects a growing argument over where federal derivatives regulation ends and state gambling authority begins. Courts across the United States have issued conflicting rulings on the issue.
The disagreement has become more intense over the past year, as platforms including Kalshi and Polymarket expanded their sports-related event contracts. The companies argue that products listed under federal commodities law fall within the CFTC’s jurisdiction.
CFTC Chair Michael Selig has repeatedly maintained that the agency has “exclusive jurisdiction” over prediction markets. The regulator has taken action against several state enforcement efforts in court and is also working on rules that would establish a formal process for reviewing event contracts.
The Trump administration has publicly backed Selig’s position, describing federal oversight of prediction markets as “critically important”.
States have continued to challenge that interpretation. In June, attorneys general from 44 states asked the CFTC to withdraw and rewrite proposed Rule 40.11. They argued the agency had exceeded the powers granted to it under the Commodity Exchange Act by entering an area historically regulated by individual states.
Their filing said Congress had never clearly authorised the CFTC to oversee sports gambling. It also warned that the proposal would expand federal power into a policy area with major economic and political consequences.
Back in Washington, Senate Agriculture Committee Chair John Boozman, R-Ark., said he understood concerns raised by tribal gaming groups but questioned whether the Clarity Act or the Farm Bill was the right vehicle for addressing them.
“The problem there is that you’re conflating issues,” Boozman said.
While lawmakers and regulators continue to argue over jurisdiction, trading activity on prediction markets has risen sharply.
Kalshi, Polymarket and Polymarket US recorded a combined $50.59bn in notional trading volume during July, the highest monthly figure reported by the three platforms. Kalshi accounted for about $37.7bn, or approximately 74.5% of the total.
Polymarket US recorded the strongest monthly growth after opening access to eligible users in the United States, although activity on Polymarket’s international platform fell. Taken together, the two Polymarket businesses still recorded less volume than Kalshi in July.
Open interest across the three exchanges declined from about $2bn at the start of July to around $1.2bn by the end of the month, as positions connected to the FIFA World Cup were settled after the tournament ended.
