The most active segment of prediction markets — sports-related contracts — is coming under coordinated pressure from lawmakers, state regulators and gaming groups, putting a key source of trading volume at risk.
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The latest step is the Indian Gaming Association (IGA) backing a bipartisan Senate bill that would prohibit federally regulated platforms from offering contracts tied to sporting events and casino-style outcomes.
Pressure on Sports Contracts Expands Across States and Federal Level
The bill, introduced by Senators Adam Schiff (D-Calif.) and John Curtis (R-Utah), has gained new momentum with the support of the IGA, which represents tribal gaming operators across the U.S. For tribal and state regulators, the issue goes beyond classification.
Sports-related prediction contracts overlap directly with sportsbook products, raising concerns about competition outside existing licensing frameworks. Several states, including Nevada and Arizona, have already challenged these markets.
Nevada has secured a temporary restraining order blocking Kalshi from offering sports contracts, while Arizona has filed criminal charges alleging the platform operates as an unlicensed gambling business. The IGA’s involvement brings these state-level concerns into a more coordinated national push.
Federal and State Positions Continue to Diverge
The bill would remove sports-related contracts from the jurisdiction of the Commodity Futures Trading Commission (CFTC), which currently treats these products as financial derivatives.
The CFTC has argued in court filings that event-based contracts fall under its authority as commodity derivatives. State regulators and gaming groups, however, view them as gambling products that should remain under local control.
IGA Chairman David Bean framed the bill as restoring state and tribal authority over sports betting, arguing that prediction markets operate outside established regulatory frameworks.
Kalshi CEO Tarek Mansour criticised the proposal, saying it reflects pressure from incumbent gaming interests rather than concerns about market structure.
What This Means for Brokers
For brokers and fintech firms, the issue is practical. Sports-related contracts account for a significant share of activity on prediction market platforms.
Restrictions at the federal level could force platforms to remove these products or restructure them under state frameworks. This creates uncertainty around product availability, jurisdiction and infrastructure decisions.
Firms exploring integrations may need to reassess whether these products can be offered, where they can be offered, and how they should be structured.
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More broadly, the situation shows that regulatory boundaries for event-based contracts are still being defined, with outcomes depending on how authority is ultimately divided between federal and state regulators.
With the IGA now actively backing federal legislation, the issue is shifting from regulatory interpretation to a broader policy debate over who controls sports-related betting markets in the U.S.
For now, the direction of the market will depend less on demand and more on how these competing frameworks are resolved.
