Prediction Markets' Exponential Growth, Tribal Implications and Beyond

Go ahead and begin. Uh thanks folks for joining us this afternoon for this round table. Um we are here in the Senate Indian Affairs Committee and uh this is an issue, prediction markets is an issue, that uh has generated a fair amount of interest, I would suggest, as I look to my Vice-Chairman. Um uh interest and concern and a kind of a desire to have, if not action, certainly a more o open conversation about what we are seeing within the prediction markets and more important to that what it means for for tribal uh entities. uh the tribal implications and beyond. So here in the committee we've invited tribal, state, and public health leaders to help us better understand the rapid growth of what we're seeing with prediction markets and and what that means for tribal governments, consumers, and communities. Um I'll be the first one to admit that I was asleep at the switch when it came to what was going on with prediction markets. I don't know, maybe you were more involved with this. I was not. Um, I was was looking at them as as kind of this novelty thing, and yet our reality is today millions of Americans are using them. One leading platform reports having more than five million monthly active users. Um, and these platforms are really being integrated into everyday life, but they're raising important questions about the utility and safety of prediction markets and the legal status of the event contracts that are being bought and sold on these platforms. The number and variety of event contracts individuals can buy has exponentially increased. Individuals can now trade on many different questions and, you know, it's it's fascinating what is out there. You can bet on whether the Federal Reserve is gonna cut rates, um uh this year what the high temperature in New York is gonna be, uh uh it's all over the board and we we all know that. Um and again, I think we're still in the early stages of this industry and and many of the most important legal questions remain unsettled. Courts across the country are cons currently considering whether sports related event contracts are a form of gambling. Many tribes and states argue that these sport event contracts amount to sports betting and therefore should be subject to tribal and the state gaming laws. Prediction market platforms and uh CFTC in contrast take the position that these sports event contracts are swaps, a financial derivative, and therefore a federally regulated financial instru- instrument under the exclusive jurisdiction of the CFTC. CFTC has also recently proposed new rules on prediction markets and the type of events that contracts may or may not made

Mm.

uh in the public interest.

Yeah.

Uh Senator Schatz and I sent a letter urging the CFTC to conduct formal tribal consultation. because this rule making is far reaching and we think it can have significant implications for tribal gaming. This is a concern to us in this committee. Um we all know the the importance, the success that tribal gaming has had for Indian country in terms of supporting essential tribal governmental needs, um social and economic services, uh to help perpetuate, protect and revive tribal cultural practices and languages as well as funding payments and donations to state and local governments. But the benefits that are spread I think are are well recognized. Uh, FY twenty twenty-five tribal gaming operations generated a record fif forty-six point two billion in gross gaming revenue. The broader economic output of Indian gaming was estimated at approximately a hundred and ten billion in the US, and that includes jobs, wages, and activity in supporting industry. So I think it it uh it speaks to the point about a disruption to the gaming industry and the consequences that would go far beyond casino operations. It could affect tribal governments, families, and rural areas at a time when many are already dealing with increased prices and constrained economic growth. So what's clear is that prediction markets will have impacts on the economy, communities, and families around the country. What is unclear is the full nature and extent of these impacts. So we're happy this afternoon to have participants around their ta- the table who will share their views from tribal state and public health perspectives so um uh thank others uh that are part of the committee as well as Senator Bozeman we welcome you to the Indian Affairs Committee room uh for this important and timely conversation. Vice Chair Schatz.

Thank you, Chair Murkowski, and thank you to all of the testifiers and for everyone in this packed house. I've met with many of you over the last several weeks and heard about the impacts of unregulated trading on prediction markets on your gaming enterprises, and I wanna quote a federal judge in the ninth circuit on pending litigation, "it looks like gambling to me." And You know, a lot of us are so hyper-educated and hyper-technical in our thinking that we forget to look at the app and see how it may or may not differ from FanDuel or MGM sports betting. And the real answer is if you wanna bet on the Philadelphia seventy-sixers to win the NBA championship, you can do so through a gambling app or you can do through a do so through a prediction market app, the consumer experience is exactly the same. It is not a commodities contract to hedge against the variability in the price of fertilizer or corn or any other input. It is a work around of both federal gaming law, generally speaking, and the Indian Gaming Regulatory Act. And so I'm very glad that on a bipartisan basis we are starting to raise the alarm, not for any specific sort of mercenary protection question between gambling operations, but because what this new avenue for gambling does is threatens to essentially eviscerate the budget of Indian country across the country. And I've met with you and I've heard from you and it definitely differs by tribe. Um but there are some people now meeting in tribal council trying to figure out what to cut. Public safety, education, infrastructure. And so we work really hard on the Indian Affairs Committee and then in the appropriation side on the IHS budget the BIE budget the BIA budget and so on. And what is about to happen to Indian country's revenue pales in comparison to anything that we could do to replace it. And so we all have to have a kind of family conversation about how we're gonna sort out the various um opportunities to gamble. Uh, I should say game, I know that's a, uh, sorry Catherine, I should say game and not gamble. I like gambling. Personally.

Alright.

Um, yeah. Um but but this is a very serious moment and I th- I I really applaud um both the chair of the Indian Affairs Committee and the chair of the Agriculture Committee, uh for being here to take this very seriously and I look forward to the conversation.

Great. Uh we do have colleagues that are here. I'd love to give everyone a second to make a statement if you'd like, or we can just go to our witnesses, but uh happy to open it up.

Oh, thank you so much, Chair Murkowski. I'm really excited and interested in this conversation, don't need to make an opening statement for sure. the chance for us to hear from everybody.

Thank you, Senator Bussman.

Um

Likewise, I just wanna thank you two for having this. This is something that's really, really important and uh I'm very, very anxious to hear what our distinguished panel says, so thank you.

Excellent.

Excellent.

Senator from the

Senator from the

gaming state of Nevada.

gaming state of Nevada

The gaming state of Nevada, thank you. Uh listen, I appreciate this conversation. It is important, and this is an area uh that I have also been hearing from our tribes, from uh gaming hotels and casinos, gaming properties across the country, um and labor um that uh at the end of the day when we're talking about these prediction markets, uh a majority of them are actively engaged in sports gaming or casino style gaming. Uh and I think what uh what I've heard from the tribes and and the gaming community across the country is that it's not that they don't w- it's not that they want to outlaw them altogether. It's that they wanna preserve their right to regulate in their space, and we will find out today. The tribes have regulated this in their space. All right? The N- Indian law has given you the ability to regulate it. The states have traditionally, like Nevada and many, have had the opportunity to regulate that. That's all they're looking for. Because right now we have a federal government, the CFTC, Uh and that I that is what I am hearing from so many. We will hear the repercussions why they want to preserve to regulate it, but I appre- I appreciate this conversation, because there's more more to this conversation than I think many of us need to hear. Thank you.

Thank you. We'll now turn to uh those we've invited to to join the committee. Uh I'm gonna ask you to try to keep your comments um relatively brief so that we can have a a a broader conversation. Um this is not a hearing, this is a round table, and so the opportunity for engagement so we can ask more questions of you is appreciated. Uh I know you all have statements, those are all gonna be included as part of the record of this round table. Um I'm just gonna ask you to to start off um as the Vice Chairman of the Indian Gaming Association, the Honorable uh Tahasi Hill.

Alright, good afternoon. Thank you. Uh as mentioned, my name is Tehasa Hill. I'm honored to serve as Vice Chairman of the Indian Gaming uh Association and also Chairman of the Oneida Nation. Up front I wanna make it clear that Indian country is rural America. We are farmers and growers. Uh we support responsible innovation and the use of futures to hedge risks and ensure fair pricing. However, we are strongly opposed to prediction markets. that have manipulated a weak regulatory agency to offer nationwide online sports gambling to kids as young as eighteen. We review this issue from a governmental lens, so I'd like to share some historical context. In the nineteen seventies tribes turned to gaming as a tool to generate revenue for basic program and services for our citizens. This was the same time that dozens of states' governments uh started their lotteries to generate revenue for their citizens. Every dollar generated by Indian Gaming goes to fund health care and education for our children, housing for our elderly, and public safety and infrastructure. Indian Gaming also generates jobs. In twenty twenty five we delivered more than six hundred eighty-two thousand jobs for rural American families. These jobs provide stable income and a path to the middle class for tribal citizens and non-members alike. In areas where these jobs would not exist. otherwise. We've worked under IGRA's framework for over forty years, carefully negotiating agreements with states to strictly regulate gaming. Tribes invest more than four hundred and fifty million dollars every year on gambling regulation, employing more than six thousand regulators to oversee our operations. Every tribe engaged in gaming maintains strict age requirements. We invest in problem gambling programs that include treatment, education, self-exclusion and staff training. Prediction markets threaten these rural jobs and revenue generated for tribes and state government's budgets by violating our laws and regulations. They claim to be innovators, but they have invented nothing. Prediction markets offer bets identical to those l- legal regulated sportsbooks. Money lines, totals, parlays, prop bets. The only difference is the prediction markets avoid our regulatory to protect consumers and the integrity of American sports. Another big difference is that they ignore strict age requirements and problem gambling programs that we've established. Prediction markets target young people and those in jurisdictions where sports betting is prohibited. They advertise on TikTok and hire influencers who claim they are a side hustle, without revealing the risks of gambling. In fact, the CEO attempted to equate sports contracts to financial literacy. This is misleading and dangerous.

Financial literacy.

Today, thanks to one person agency, every teenager with a smartphone can now lose their shirt without leaving their house or their dorm room. We're only starting to see the devastating impacts of our kids' mental health and their finances. No one voted for this. Congress did not pass a law. This is happening because one person has declared that on-line is legal in every state, including Hawaii and Alaska, and on every Indian reservation. Tribal governments are not alone in this fight. We are proud to work alongside some of the organizations represented here today, the National Congress of American Indians, the National Tribal Gaming Commission and Regulators, and we're glad to be joined by labor and more than one million casino workers throughout the United States who are fighting to protect good paying American jobs. And finally, tribal gaming is aligned with forty-four state attorney generals who have filed legal briefs in federal and state courts and comments to the CFTC including the state of Ohio who is represented here today. The list includes the state attorney generals from nearly every member of this committee. They're fighting to enforce laws of their states, your states. Some of these laws prohibit all forms of gambling. Some prohibit online gam gaming and some rely on revenue. from gaming to support their communities. In closing, I leave you with three requests. One, we urge you to advance S forty one sixty, Prediction Markets, our gambling act. Two, we ask that you ensure the Clarity Act stops all sports and casino gambling through prediction markets it provides IGRA and state and tribal gambling laws are full force and effect and three, we urge you to stop the outrageous CFTC rule proposed uh that constitutes the height of regulatory agency capture. Again, thank you for this opportunity, and we look forward to this discussion.

Thank you very much, and uh we will now turn to the President of NCIAI, uh Mark McCarroll. Welcome Mark, Chairman, President.

thank you Chairman Murkowski, uh ranking member Schatz and the other distinguished members of this committee for holding this round table on prediction markets. My name is Mark McCarroll and I am the President of NCAI, the National Congress of American Indians, and also the Tribal Chairman for the Pechanga Band of Indians in California. And today I want to raise three primary points. The first is the regulatory framework of the Indian Gaming Regulatory Act, that it must be respected. Congressional intent was clear when the act was promulgated, that Congress never intended the Commodity Exchange Act to preempt IGRA, the Indian Gaming Regulatory Act. When Congress passed IGRA, it was unambiguous. Tribes hold exclusive jurisdiction over gaming on Indian lands, operating within a framework built through the decades of negotiation among tribes states and the federal government. And so for over thirty years that framework has worked. Tribes and states have negotiated compacts that protect consumers, ensure regulatory accountability, and affirm the and strengthen tribal sovereignty. This framework, however, did not happen by accident. It was built deliberately, through hard-won negotiation and sustained efforts. But watching a fundamental fundamentally distinct federal agency step into this space without authority, without consultation and without regard for the existing framework is deeply troubling. It usurps all the infrastructure for successful tribal gaming. Today, prediction markets are being used to offer sports and event betting entirely outside the framework Congress created for ending gaming. thereby undercutting tribal nation's status as sovereign regulators in this space. By relying on commodities and derivatives law instead of gaming law, operators are attempting to sidestep tribal state compacts and IGRA altogether. This sets up a dangerous precedent where federal agencies could bypass congressionally affirmed tribal rights whenever it's convenient, provided that they address the workaround in unfamiliar legal language. So, make no mistake, Nothing in the legislative history of the CEA suggests that Congress ever intended the CFTC to become a backdoor regulator of gaming the CFTC was created to oversee commodities and derivatives not to create tolerate or bless a shadow framework for sports and event betting that Congress never authorized it to regulate. In fact, the legislative record confirms this, during the twenty ten Dodd-Frank debate, Senator Blanche Lincoln then the Senate Agricultural Committee the chair of the ag committee, uh and an author of the Dodd-Frank derivatives amendment, engaged in a colloquy with Senator Dian Feinstein, making this point explicitly. Senator Feinstein emphasized the importance of restoring the CFTC's authority to stop trading that runs contrary to the public interest, warning that derivatives traders and traders had already wagered billions on contracts serving no legitimate commercial purpose. Senator Lincoln, however, went further, stating plainly that the CFTC needed the power to prevent derivatives contracts that exist predominantly to enable gambling through so-called event contracts. Senator Lincoln specifically warned that it would be easy to construct event contracts around sporting events like the Super Bowl, the Kentucky Derby, or the Masters, contracts that would serve no legitimate commer- commercial purpose and exist solely for gaming. And I'll just add that this year Super Bowl in San Francisco, uh one of these uh prediction market operators, Kalsheek, um wagered well there were there were over one point five billion dollars that were wagered on the Super Bowl through Kalsheek's platform alone. So just a couple of weeks ago we heard from Senator Christopher Dodd, the author of the Dodd-Frank Act, who stated that when Congress passed the act, lawmakers were well aware of existing federal and state gaming laws, and quote, had no intention of amending those laws to turn the CFTC into a national gambling regulator. So this is not ambiguous legislative history. This is Congress on the record warning exactly against what we are seeing play out today. Fundamentally, the CFTC's claim of authority to regulate prediction markets represents a sweeping federal overreach that threatens tribal and state sovereignty and a separation of powers issue, where an executive branch agency defies statutory authority and congressional intent. So NCAI calls on the United States Congress to exercise its constitutional prerogative and end the prohibited gaming under this captured agency. The second issue is revenue that's straight generated from tribal gaming operations and that it funds critical services for tribal and non-tribal members alike. And CFTC regulated event contracts that mimic casino sty- casino style gaming threatened this vital source of support. So, tribal gaming tribal gaming revenue is not simply a matter of tribal enterprise, it is the financial backbone of essential services in Indian country. And this revenue funds health care, education, housing, infrastructure, public safety, and countless other programs that tribal communities depend on every day. When that revenue is diverted, so too is the ability of tribal governments to meet their responsibilities to serve their citizens.

Hmm.

Put it this way, every dollar wagered on unregulated gaming, like illegal prediction markets, is a dollar pulled away from tribal jobs, tribal facilities, and tribal community programs. These event contracts are not nu- not a neutral alternative. They compete directly with regulated tribal gaming for the same consumer dollars, but without the compacts, without oversight and without revenue sharing obligations that channel gaming proceeds back into public services. And the scale of what's at stake is significant. Tribal Gaming supports hundreds of thousands of jobs in the United States, and a majority of which are in rural America, and generates billions of dollars in annual economic activity, activity that could be steadily eroded and an as an unregulated events contract market siphons off um this revenue, the tribal revenue. Tribal gain in revenue doesn't just support tribal communities, it funds critical services for nonnatives as well, and allowing the CFTC regulated event contracts to encroach on this space does not just threaten tribal sovereignty and self-sufficiency, it threatens a funding stream that benefits state and local economies throughout the nation. Remember, tribal nations are stakeholders in tribal gaming. We are not shareholders. Third, the CFTC must engage in meaningful consultation with tribal nations. Consultation is not a courtesy, it is a legal and moral obligation the federal government owes to sovereign tribal governments affirm time and again through treaties, statute, executive orders, and the government-government government-to-government relationship that defines federal Indian policy. And yet, The CFTC is advancing prediction markets prediction market products that function like gaming without ever sitting down with the tribes whose ecco- whose economies and legal rights are directly in the crosshairs. There has not been a formal notice, nor a meaningful dialogue, and not even an acknowledgement that as a federal agency, the CFTC does have a responsibility to tribal nations to consult. So this failure is especially glaring given the stakes. We are not abstract policy questions. These, all these issues, especially the lack of consultation, strikes at the heart of tribal sovereignty, as compacts negotiated in good faith with state governments and at and at revenue streams that fund the schools and the clinics and the housing that our people rely on. When a federal agency's actions carry that kind of weight for tribal communities, the duty to consult is not optional, it's fundamental. So, we implore the CFTC to sit down with tribal leaders before you act, not after. Respect the tribal government, the government-to-government relationship that the Constitution and federal law and generations of precedent demand. Because when you regulate or fail to regulate products that reach directly into our economies you are not just making a policy decision, you're making a decision about our future, And we have every right to be in the room when that decision is made, the right to transparency, of due notice and good faith engagement, none of which we've seen to this point. We otherwise are being denied free prior and informed consent. I'll stop there. Thank you.

Thank you, President McCom- Jamie Hummingbird is the Chairman of the National Tribal Gaming Commissioners and Regulators. Welcome.

Thank you, Chairman Murkowski, uh Vice Chairman Schatz, and members of the committee. I thank you for the opportunity to appear before you today on behalf of the National Travel Gaming Commissioners and Regulators the men and women that so noted by uh Vice Chairman Hill the six thousand men and women that are effectively regulating travel gaming across the country today protecting the integrity of the Indian Gaming Regulatory Act travel state compacts and the federal trust responsibility owed to tribal nations I appear today because the rapid expansion of sports wagering prediction markets poses an immediate threat to tribal sovereignty, to the integrity of the Indian Gaming Regulatory Act, and to the governmental revenues as so noted that go to so many vital tribal services. These products are marketed as financial instruments, purported commodities, derivatives, or swaps. But let's be clear here today and call them by their true name. When you wager something of value on the outcome of a sporting event, it sports wagering. Relabeling the wager as an event contract or a prediction market or derivative does not change what it is. If the federal government permits CFTC regulated platforms to offer sports wagers nationwide outside of tribal and state gaming systems, it will create a federal loophole loophole that bypasses IGRA, undermines tribal-state compacts, and displaces nearly forty years of hard-won intergovernmental cooperation. As I'm sure you are aware, Congress enacted IGRA in nineteen eighty eight to promote tribal economic development, to promote tribal self-sufficiency, and to promote strong tribal governments while ensuring that tribes remain the primary beneficiaries of gaming on Indian lands. IGRA creates a careful balance among tribal sovereignty, federal oversight, and for class three gaming, tribal state compacts approved under federal law. For nearly forty years, sports wagering has fallen squarely within the class three framework and must be conducted through a robust regulatory control made possible through tribal state compacts that are carefully negotiated between sovereign states and tribes. That framework is a federal Indian law success story. Tribal gaming commissions work daily with state regulators in the National Indian Gaming Commission to address licensing, audits, patron protection, game integrity, responsible gaming, facility safety, and compliance. We are a specialized local and accountable form of regulation. The CFTC is not a gaming regulator. It does not have the personnel, the field presence, direct patron interaction, geolocation oversight, or surveillance expertise to come uh compare to what the tribal regulators exercise every day. Now, recent market conduct confirms the seriousness of seriousness of this event. In Nevada, the Nevada Gaming Control Board accepted the surrender of Flutter Entertainment and FanDuel approvals and approved withdrawal requests from DraftKings, pending sports wagering applications after concluding that the company's intended sports event contract activity was incompatible with participation in Nevada's gaming industry. Public reporting likewise states that DraftKings and FanDuel abandoned or withdrew Nevada licensing efforts while pursuing prediction market products. This is not a technical licensing footnote. It is evidence that major national sports book operators understand prediction markets as an alternative path around traditional gaming regulation. The economic impact is equally direct and harmful. Any gaming revenues are at risk. They fund all of our essential services that we provide to our tribal citizens. The prediction market platforms extract value from the local communities compact obligations, tribal licensing, state and tribal revenue sharing obligations, or dedicated contributions to problem gaming mitigation. Consumer protection is also at stake. Tribal gaming regulators enforce licensing, internal controls, annual audits, responsible gaming safeguards, age and identity verification, as well as market integrity pr- protections. Perdition market sports contracts do not have an equivalent protection. A national loophole for sports wagers under a financial label risks underage participation, inadequate geofencing, and weak responsible gaming protections. Federal consultations obligations reinforce the need for caution. You know, policies that have substantial direct effects on tribal nations, the federal tribal relationship or the distribution of power among sovereigns meaningful government-to-government consultation. And consultation cannot occur after an agency has already allowed markets to develop in a manner that impairs tribal gaming authority. It must be timely, it must be substantive, and it must be capable of affecting the outcome. The NTGCR respectfully asked Congress to act quickly and decisively. But first, Congress should make clear that sports-related and casino-style event contracts are gaming products. when they involve staking value on uncertain outcomes for a possible payout. Second, Congress should enact express savings language confirming that nothing in the Commodity Exchange Act, the Clarity Act, or any federal market structure legislation preempts, supersedes, impairs or limits IGRA, tribal gaming laws, tribal state compacts, or other tribal state and federal gaming protections. And Congress must also direct the CFTC to halt the self-certification or approval of sports related event contracts until the agency completes formal government-to-government consultation with tribal nations and coordinates with the National Game Gaming Commission and tribal gaming regulatory authorities. Federal financial regulation must never be used to gloss over or erase tribal sovereign gaming jurisdiction by means of regulatory rebranding. Now the question before policymakers is not whether innovation should be allowed. Travel nations, who have been long-time proponents of the rule of law, have supported innovation, if not have led the way in innovation in the gaming industry through lawful gaming environments. The question today is, should private platforms be allowed to use financial market terminology to avoid gaming law, to bypass travel regulators, undermine travel state compacts, and siphon govern governmental revenues from native communities? The answer must and should be an emphatic no. On behalf of the NTGCR and the tribal gaming layer regulators who protect the industry of Indian gaming every day, I respectfully ask this committee to defend IGRA, uphold the federal trust's responsibility, require the CFTC and other companion federal agencies to engage in meaningful tribal consultation, and ensure that no federal agency or private market actor is permitted to erode tribal sovereignty through prediction market rebranding. I thank you again for the opportunity to share this information with you, and appreciate the meaningful and long-lasting impacts the prediction markets in sports betting will have on Indian country as well as the nation as a whole.

Thank you.

Thank you.

Next we'll hear the state's perspective. We have the Solicitor General from the state of Ohio, uh the Honorable Martha uh Shidron. Welcome.

Chairman Murkowski, Vice Chairman Schatz, Members of the committee, thank you for inviting me to speak today. It is a privilege to appear before you on behalf of the state of Ohio, and I appreciate the opportunity to share the state's perspective on the regulatory challenges posed by sports betting on prediction markets. My office first became involved with prediction markets in early twenty twenty five when prediction market platforms like CalShe began offering sports bets on their trading platforms. Since then, Ohio has been at the forefront of the litigation surrounding these issues. We have litigated them in the sixth circuit, coordinated bipartisan state participation in litigation around the country, and most recently led a coalition of forty-four states in responding to the Commodity Futures Trading Commission's proposed rulemaking. For more than two centuries, gambling has been regulated in our federalist system. primarily by the states. That is because gambling has long been understood as implicating the state's responsibility to protect the health safety and welfare of their citizens. In Murphy versus Ndub- NCAA, the Supreme Court reaffirmed that principle. Holding that absent federal legislation, states remain free to make their own policy choices about whether and on what terms to authorize sports betting. Some prohibit sports betting altogether. Others, like Ohio, chose to authorize sports betting only after extensive public debate

Mm-hmm.

and in Ohio after a constitutional amendment approved by a narrow margin of voters.

Mm-hmm.

The federal government's role has historically been very different. For about a century, Congress has regulated financial derivatives markets through the Commodity Exchange Act. Those markets exist to serve commercial purposes. They help businesses hedge risk, facilitate price discovery, and allocate capital efficiently. Federal law was designed to ensure that those markets are fair, liquid, transparent, and free from manipulation. Markets that attract speculation require one kind of regulator. But markets founded on speculation, like sports betting, require a different kind of regulator altogether. Sports betting is fundamentally different from tr- traditional derivatives. A wager on whether the Ohio State covers the spread is not managing commercial risk or facilitating price discovery, nor is it helping producers or consumers hedge against future uncertainty. As one prediction market put it, These products exist merely for diversion and amusement. That difference critically informs the regulatory response. Federal law, like the Commodity Exchange Act, is a sophisticated and highly effective framework for regulating financial markets. But it is a blunt tool for addressing the public health and consumer protection challenges that a company gambling because it was designed to protect and police market integrity, not to protect casual bettors from the unique harms of gambling. States regulate gambling differently because they are trying to solve a different problem. Their focus is not facilitating commercial market transactions through carefully defined market mechanics. Their focus is protecting participants in a gaming environment. State gambling laws thus ask dis- different questions. Are vulnerable individuals protected? Are operators promoting responsible gambling? Are sporting events insulated from corruption? To address these consumer-focused concerns, some states, for example, Ohio and New Jersey, impose minimum age requirements for placing sports wagers. States generally require betting operators to obtain licenses, verify ages, report suspicious betting activity, maintain responsible gaming programs, and administer voluntary exclusion programs for individuals struggling with gambling addiction among other things. Prediction markets bypass many of these state law protections.

Uh-huh.

The risks extend well beyond access to the products themselves. Increasingly, the evidence suggests that a relatively small number of sophisticated traders on prediction markets, profit from a much larger number of casual, Professional traders themselves acknowledge that these markets are attractive because they can capitalize on optimism, overconfidence, and other predictable cognitive biases among participants wagering for entertainment rather than for investment. For generations, the distinctions between markets that attract speculation and markets founded on speculation has guided the allocation of regulatory authority. between the federal government, which regulates traditional financial markets, and the states, which regulate gambling. I believe it remains the right division today. But Congress may ultimately conclude that a federal rule is appropriate. If it does, and it must do so very clearly, I urge it to build upon and not replace the knowledge the states have accumulated over decades of regulating gambling. States have developed deep expertise in licensing, consumer protection, responsible gaming, integrity monitoring, enforcement, and protecting vulnerable populations. Those are precisely the issues prediction markets now present. Any federal solution should give due regard to the state's expertise on the matter. I thank you again for the opportunity to discuss this.

Thank you. And to our colleagues that just came in, we've we've heard uh the tribal

Madam Chairman, uh, Mister Vice-Chairman, I'm going I've tabled my pre-printed remarks, I'm gonna get us dangerously close to back on schedule for you. Um, that doesn't mean anyone on prediction market should be posting an under right now, but I am. It's my one gambling joke of the day. My name is Harry Levant, I'm the Director of Gambling Policy with the Public Health Advocacy Institute at Northeastern University School of Law. I'm also a gambling addiction clinician, run a gambling treatment recovery group. And I'm a gambling addict. Made my last bet on April twenty seventh, two thousand fourteen, survived a suicide attempt that same night related to my gambling addiction. I hurt a lot of people in my gambling addiction. On February thirteenth, two thousand fifteen, I stood in a courtroom in Philadelphia, Pennsylvania. Wasn't all that unusual for me, because I had been practicing law for twenty three years. Twenty-two of them I remember fondly, the last year obliterated in the haze of what can only be described as a pathological gambling addiction and I stood in that courtroom that day not as a lawyer, but as a disbarred lawyer and a defendant in Commonwealth of Pennsylvania versus Harry Levant. And on that day in the presence of the clients who I devastatingly hurt, the court I had betrayed, and in the presence of my three young children with tears streaming down their faces, I pled guilty to thirteen financial felonies related to my misappropriation of funds and the grips of my gambling addiction. As a therapist now, I'm supposed to use the word disorder. Disorder is too easy sounding a word, you know, we have a disorder when the microwave stops heating the vegetables quite quickly enough you need a new microwave. Addiction is ugly, it is devastating, it is painful, for each person who struggles, eight to ten others around them are hurt. I have the privilege of being here with you today for a fundamental reason, something I can guarantee you everyone in this room will agree with, or need to look in the mirror if you don't. Prevention of harm is the single best form of treatment. Single best form of treatment. And on that day of my guilty plea, as I was being sentenced for my felonies, I made a pledge. The pledge that I made to the court and in the presence of my children was that if I could get well, I would dedicate my future to helping prevent others, particularly younger adults, from suffering a similar fate. But you see, I made my first bet when I was fifteen years old. And the key word in my vow was the word prevent. Um, I am not a prohibitionist. I'm gonna make the Honorable Senator Cortez Masto and the distinguished members of tribal nation happy. I'm in favor of the properly regulated legalization of sports gambling. But what we have today is far from that and the two questions i get asked the most often when i made that vow i was gonna help prevent other people from suffering harm two questions i get well if i knew in two thousand fifteen what the world would look like on these phone devices eleven years later would i have been so brazen to make that vow and secondly do i think i could get sober today in this world whether we are talking about micro betting on traditional apps, or we are talking about prediction markets. Online sports betting is a fundamentally different, inherently dangerous, and defectively designed product. We say it again, defectively designed product. Why? It brings together all of these interests, the sports leagues, the teams, the owners, the players, the gambling companies, AI companies, now prediction markets. It brings them all together in a collective partnership, where they all wanna make as much money as possible. It's the equivalent of grandmom's Thanksgiving apple pie. You know, at the end of Thanksgiving night, we all say, give me a little piece of pie. Uh-uh. We all want as big a piece of pie that night as we can get. And the same thing is true with all of the entities involved in delivering micro-betting and prediction market micro-betting they all want as big a piece pies they can get their hands on. The problem is, this magical pie, it only has one ingredient. And that ingredient is how much they can get the American people to lose, and how quickly can they get them to do it. Micro-betting from Jeff Kings, Fando, MGM is devastatingly lethal. That's for another hearing. Prediction markets take us to a whole new level. And in closing before we turn to questions, Be there any doubt of whether prediction market sports contracts are gambling. I go to the opening comments of the chair and the vice chair, each of you, and I wrote it down, you used the word bet. But most importantly, we're not talking about just Cal Shee and Polymarket. This is Jeff King's ad I clipped today. Offering betting in all fifty states, including Alaska and Hawaii. that have not yet legalized this. And our good friends at FanDuel with the exact same thing, proclaiming and offering now down to people as young as eighteen years old, gambling in all fifty states. I have had in the last three months six clients in my recovery group return to gambling on prediction markets. Why? Because they thought they were making investments. Our Article Three courts are gonna decide a lot of legal issues. In the meantime, this distinguished body, Congress, has the plenary authority to act. I will continue to come before each committee that will have me to talk about the need for minimum federal safety standards. States can go further under the tenth amendment, but I am here today with real life ideas to help you and will come back each time you ask because there are ways to make this safer and I join with the distinguished leaders of tribal nation, I pledge to continue working with you and others to make this safer. I'm not a prohibitionist, but we have a mental health crisis on our hands. Thank you for your time.

Thank you, thank you for your testimony. Um

We have a lot of members here and I want to make sure that we have an opportunity to to weigh in uh with those who we've invited I'm just gonna ask a really quick question and I think this is probably directed to you, Vice Chairman Hill, um because Senator Schatz has mentioned it, I mention it in my comments, it was mentioned by several of our our tribal leaders here, um the the impact that prediction markets pose to tribal and and other gaming operations uh in terms of the revenues that then come and support in so many, many different ways. Does IGA have the the research on the impact of prediction markets um on the tribal gaming gaming revenues? It's it's important around here for for people to understand what are we really talking about. I am the uh not only the chairman of this uh In Indian Affairs Committee, but I am chairman of the Interior Appropriations Committee, and believe you me, if we have to figure out where in our interior we are going to backfill the losses that come um if prediction markets truly do take over. Do we have that data and uh can we do a better job in collecting and analyzing it and sharing it?

Yes, uh thank you uh Madam Chair for the question. Um currently IGA is working on analyzing national data and the impacts of prediction markets on tribal sports gambling uh the data is primarily pri pri proprietary uh proprietary,

Proprietary.

say that word right, proprietary and to obtain it uh we would have to have the tribes give us that data. So it's a

Is that something that you think there's a willingness to share because of the impact? Can we do a bit of a

Um yeah I I definitely think so, I know like in the state of Wisconsin the tribes in the state are working together to analyze the sports book uh market for the state of Wisconsin. again just for getting those verifiable numbers and that analysis uh for for the tribes and the state to to work off of so there is definitely forward movement uh we're actually expecting that phase one of that report due in about ten or fifteen days.

Okay, I think it's really important to try to get that, Senator Schatz?

Um I'm gonna try to do this quick and so because we have so many people I will try not to chew up five minutes um quick question for each one sentence if possible and you're fr- free to agree with each other. Um what is the one thing that we should be doing in the short r short run? Go ahead, Mister Hill.

Um I think the the the the amendments to the Clarity Act would be probably step one or uh moving forward uh with the the Senate bill that uh um s um prediction markets,

Purchase, yeah.

yeah, are are are sports bets.

Mister McCarroll.

Enforcing existing law that the the cea itself prohibits gaming uh that go from there uh also though fill out the commission it is uh really an abomination it's an upside down regulatory agency to have one commissioner when there are four vacant seats on that commission

yeah

and i i would echo that the uh the need for um us to have some solid regulatory framework to look at and have a clear understanding of what is intended by the laws versus how they're being interpreted and applied, if we were able to get uh some clarity, if you will, no pun intended, uh on that issue, that would be a a great benefit.

It's less true.

Uh, agreed with that. Legislate and legislate in a way that makes clear that poorly fit, uh, financial derivatives law does not preempt state and tribal law in in the way that is being litigated across the country.

emphasis on short term that you can actually do. Bring the sports league commissioners in, place them under oath, get to the bottom of why they are selling their data. For gambling purposes on prediction markets, the New York Mets entered into a multi multi billion dollar contract with a brand new prediction market yesterday. You could have hearings today similar to the tobacco hearings. Things will change.

Mm-hmm.

Colleague, Senator Smith, there you go.

Yep. Thank you, thank you so much. Um, I really appreciate this. You know, I serve both on this committee and also on the um agriculture committee. Uh, Chair Bozeman uh can vouch for how I have asked many of these questions of the the Commodities Futures Trading Commission as well as we try to figure out like how it is that we have this sort of um uh just rapid expansion of prediction markets and complete contravention to IGRA and state tribal compacts and tribal So your points are really so well taken. Two quick things. Um, I think I saw data, which, I appreciate what Senator Murkowski was asking. I think I saw data from the American Gaming Association, which said that they estimated that it was roughly a billion dollars in state and tribal revenue. That has been lost. Um, I don't know if anybody wants to comment on that, and I don't know how they gathered that information, but just to give us a sense of scope,