Gaming associations are urging the US Congress to regulate sports contracts.

The American Gaming Association (AGA) and the Indian Gaming Association (IGA) sent a letter to the US Congress requesting regulation of sporting event contracts, which they classify as "indistinguishable" from legal sports betting. The document was sent this Monday (January 12th) to members of the US House and Senate, warning about operators who may be circumventing state laws and tribal sovereignty.

The two entities point out that prediction market operators are taking advantage of the Commodity Futures Trading Commission's (CFTC) inaction to launch products with limited regulatory oversight. According to an analysis by Casino.org, these sports event contracts have grown exponentially in trading volume since their launch in January of last year, expanding beyond the results of individual games to include complex combined bets and even potential bets on the university transfer portal. The current self-declaration process allows companies to offer derivatives related to sporting events with minimal oversight.

In the letter, the associations suggest that Congress use cryptocurrency legislation as a tool to regulate these markets nationwide. "We firmly believe that Congressional review of cryptocurrency market structure legislation offers an important bipartisan opportunity to prevent sports betting and casino games under the guise of 'event contracts'," the document states.

The associations' concern increased last month when the IGA highlighted that neither the Commodity Exchange Act nor the CFTC offer adequate protections to regulate companies like Kalshi and Polymarket, which provide event contracts in states where the expansion of gaming is a tribal issue.

Trade associations warn that these products are available to people 18 and older and pose a threat to state and tribal revenues. In many states, tribal casino operators have exclusivity agreements that require approval from these groups for any expansion of gambling.

“According to 39 state attorneys general, these contracts are contrary to state laws. They violate the Indian Gaming Regulation Act (IGRA), which grants tribes the exclusive right to offer gaming products on their lands,” the associations point out. The sporting event contracts also violate the Federal Information Transmission Act (Wire Act), which makes it illegal to offer interstate sports betting.

The AGA and IGA argue that prediction markets are exploiting contracts linked to negative events, such as assassinations and wars, bets that would not be permitted under state and tribal laws. Contracts for football events have generated increases in business volume for operators.

“They (sports event contracts) lead consumers to believe that a sports bet is an investment, they do not protect young people and the vulnerable, they open the door to money laundering, match-fixing and insider trading,” warn trade associations. “They steal state budgets and tribal finances, while forcing states and tribes to spend enormous legal resources to defend their sovereignty.”

Together, the associations represent the regulated legal gaming industry in the United States, which generates $329 billion in annual economic impact, produces $53 billion in tax revenue, and supports 1,8 million jobs. As one of the most highly regulated industries in the United States, licensed operators work with more than 8.400 state and tribal regulators nationwide to ensure transparency, integrity, and rigorous consumer protections.

During his confirmation hearing, CFTC Chairman Selig made it clear that the commission would not control sports betting contracts under his leadership, preferring to await the outcome of litigation that could take years to fully resolve. However, he also stated that the CFTC would follow Congress should it decide to intervene in this matter.

Congress has not yet indicated how it will respond to this request or whether it will initiate a formal investigation into these event contracts. The CFTC has shown increasing interest in overseeing these markets.

Check out the joint letter from the AGA and IGA addressing unregulated sporting event contracts.