A gaming attorney told tribal leaders Wednesday that it’s important for Indian Country and state attorneys general to team up and oppose prediction markets.
Daniel Wallach appeared on the New Normal webinar hosted by the Indian Gaming Association one day after DraftKings acquired Railbird Technologies and its Railbird Exchange. Railbird has approval from the federal Commodity Futures Trading Commission to operate as a regulated futures exchange in the U.S., which includes event contracts. Railbird has yet to launch, and DraftKings also announced it’s launching DraftKings Predictions, a mobile app that will offer regulated finance, culture, and entertainment contracts, leaving open additional categories, an expansion many expect to include sports. That would enable the company to enter markets where sports betting isn’t allowed. FanDuel is also positioning itself to enter the sports prediction market.
Wallach said that the four court rulings so far in Nevada, New Jersey, and Maryland are trending in favor of the states.
“The courts are finally addressing the issue of Congressional intent and analyzing how implausible it would have been for Congress to ban sports betting through the Wire Act and PASPA and at the same time tacitly allow it through an obscure and opaque commodities exchange,” Wallach said. “Congressional intent won’t change going forward. I would say to online sports betting companies and others that want to dip their toe into the water that we’re four decisions in and they’re trending the wrong way. There will be at least six to eight more decisions between now and the end of the year. If you want to take the temperature, the right time to do it would be on January first.”
Wallach said results are expected Thursday from a tribal lawsuit in San Francisco on a motion for a preliminary injunction. Three tribes sued Kalshi and Robinhood in federal court, alleging it’s operating illegal sports betting on tribal lands.
Wallach said Massachusetts is the first state to sue Kalshi and if it succeeds in getting the case transferred to state court, it would be a “slam-dunk victory,” which means geofencing around the entire Commonwealth.
IGA Conference Chairman Victor Rocha, who moderated the program, said Kalshi and Polymarket are moving at breakneck speeds, while FanDuel and DraftKings “are on the sidelines prepared to jump in.” Rocha said the case boils down to states’ rights and tribal sovereignty. “We won’t stop. We can’t stop. That’s not what we do. We fight. We have to fight with what’s left of our sovereignty. Whatever it takes.”
Wallach said a strategy is underway in which tribal attorneys are filing briefs in prediction-market lawsuits across the country to help “turn the tide and rack up wins,” even in states with no tribal casinos.
“Until the tribes joined the battle, Kalshi was kicking the state’s (behinds),” Wallach said. “Kalshi had a murderers’ row of attorneys with Supreme Court experience. It was a mishmash with the states’ attorneys. The states were caught off guard and flatfooted and their initial briefings weren’t particularly strong. Kalshi racked up quick wins in Nevada and New Jersey before the pendulum swung when the tribes got involved. Nevada hired one of the preeminent Supreme Court lawyers in the country and the playing field is level. Previously, it was like the New York Yankees versus the Tidewater Tides.”
Wallach said states should file lawsuits against prediction market operators rather than depending on other states, because each state can prevail. He said there’s a misconception that states should wait on the sidelines, because it will play out in multiple courts and the Supreme Court will decide the issue.
“The truth is states individually can prevail in their cases and secure preliminary injunctions. At least in the interim, victory is on a state-by-state basis and once Kalshi is forced to geofence around three tribes or around Massachusetts, that will ignite a barrage of similar lawsuits from other tribes around California and other states throughout the country. The states have to get off their (behinds). The tribes should work in tandem with their state governments and underwrite the funding of these lawsuits.”
Jason Giles, IGA’s executive director, questioned where Texas and Utah were in this fight, since those two states don’t allow gambling.
Wallach said states with a licensing process have more incentive to bring lawsuits, in order to protect the regulated markets that bring in tax revenue.
On Wednesday, the NHL announced a partnership with prediction market operators Kalshi and Polymarket and Kalshi hinted there could be deals with other sports leagues.
“That comes as a surprise to me, because three to four months ago, the NBA and Major League Baseball wrote comment letters in connection with a CFTC roundtable in which they sounded alarm bells over the lack of sports integrity safeguards,” Wallach said. “In the state and tribal systems, statutes and laws require information sharing and cooperation and integrity monitoring. The CFTC has never passed rules on that and I’m curious to see how the NFL, NBA, and MLB may have come around on this point.”
Wallach was surprised by the NHL’s action, because he called Kalshi “an extremely reckless company in getting out over the skis” and putting out public comments and marketing materials that tout they’re legal in all 50 states.
“If you’re a sports federation worried about the potential for the perception by fans that everything isn’t on the level, Kalshi is the riskiest partner to take on, given how aggressive they’ve been in pushing the envelope way beyond what they originally argued.”
Wallach criticized prediction markets for offering sports event contracts to those 18 and older instead of the 21 threshold in the vast majority of states and tribal governments.
“The ages of 18 to 21 are the most at-risk segment for compulsive and problem gambling. Tack onto that the absence of any responsible-gambling protocols and consumer protections,” Wallach said. “Talk about the Wild West. This is the Wild East, centralized in New York City and Washington, D.C., without any sports-related protections and responsible-gambling safeguards. What could possibly go wrong? Reputationally for the leagues and online sports betting operators, that could come home to roost very quickly.”
