Senators have pushed to preserve state and tribal control over sports betting by seeking changes to the Clarity Act as Congress weighs federal crypto market legislation.
During a Senate Indian Affairs Committee roundtable on Tuesday, Indian Gaming Association Vice Chairman Tehassi Hill argued that prediction markets tied to sports and casino events should remain subject to state and tribal gaming laws instead of falling under the exclusive oversight of the U.S. Commodity Futures Trading Commission.
The discussion comes as the Senate works to advance the Clarity Act before lawmakers leave Washington for the August recess, with limited legislative time remaining before attention turns to the November elections.
Supporters of the proposal see the cryptocurrency market structure bill as a possible vehicle to clarify the limits of the CFTCs authority over prediction markets.
Senators seek Clarity Act changes over prediction markets
Speaking before the committee, Indian Gaming Association Vice Chairman Tehassi Hill urged Congress to amend the Clarity Act to explicitly prevent “sports and casino gambling through prediction markets” from bypassing existing gaming rules.
Hill said the legislation should make clear that state gaming laws and the Indian Gaming Regulatory Act, rather than federal commodities law, govern those markets. Tribal gaming groups have argued that expanding federal oversight could weaken state and tribal authority over sports wagering that has traditionally been regulated at the local level.
Later in the hearing, Sen. Tina Smith, D-Minn., said lawmakers could insert similar language into either the Clarity Act or the Farm Bill, which Congress regularly uses for wide-ranging policy provisions beyond agriculture.
“I just want to point out to the committee that I think we do have moving vehicles that could just clarify that the Commodity Futures Trading Commission, the Commodity Futures Act does not preempt IGRA or tribal-state contracts,” Smith said.
“Prediction markets need to abide by existing law. That seems to me to be fairly simple and non-controversial.”
Her comments add to an expanding debate over where federal derivatives regulation ends and where state gambling authority begins, a question that has produced conflicting court rulings across the United States.
CFTC authority remains at the center of the dispute
The disagreement has intensified over the past year as platforms including Kalshi and Polymarket expanded sports-related event contracts while arguing that products listed under federal commodities law fall within the CFTCs jurisdiction.
CFTC Chair Michael Selig has repeatedly argued that the agency has “exclusive jurisdiction” over prediction markets. The regulator has challenged several state enforcement actions in court while also pursuing rulemaking that would establish a formal framework for reviewing event contracts.
The Trump administration has publicly supported Seligs position, calling federal oversight of prediction markets “critically important.”
States, however, have continued to dispute that interpretation.
As crypto.news previously reported, attorneys general from 44 states urged the CFTC in June to withdraw and rewrite its proposed Rule 40.11, arguing that the agency had exceeded the authority granted under the Commodity Exchange Act by moving into an area that has historically been regulated by states.
Their filing argued that Congress never clearly authorized the CFTC to oversee sports gambling and warned that the proposal would expand federal authority into a policy area carrying significant economic and political consequences.
Back in Washington, Senate Agriculture Committee Chair John Boozman, R-Ark., indicated that he was sympathetic to concerns raised by tribal gaming groups but questioned whether the Clarity Act or the Farm Bill should be used to resolve them.
“The problem there is that youre conflating issues,” Boozman said.
“I don‘t think those things are going to happen. I think you run into the same problem with Clarity in the sense that crypto is not prediction markets, so I think you’ve got to build your case. Im very sympathetic. I want to help you.”
Prediction markets continue expanding despite regulatory uncertainty
Even as regulators and lawmakers continue debating oversight, trading activity has continued to climb.
As previously reported by crypto.news, Kalshi, Polymarket and Polymarket US generated a combined $50.59 billion in notional trading volume during July, the highest monthly total recorded by the three platforms. Kalshi accounted for approximately $37.7 billion, or about 74.5% of the combined volume.
Polymarket US recorded the fastest monthly growth after expanding access to eligible U.S. users, while activity on Polymarket‘s international platform declined. Combined volume across both Polymarket businesses nevertheless remained below Kalshi’s July total.
Open interest across the three exchanges fell from roughly $2 billion at the beginning of July to around $1.2 billion by month-end as positions tied to the FIFA World Cup settled following the tournaments conclusion.