Comment Text:
COMMENTS OF THE LITTLE TRAVERSE BAY BANDS OF ODAWA INDIANS
Re: Prediction Markets
RIN 3038 AF65
I. INTRODUCTION AND INTEREST OF THE TRIBE
The Little Traverse Bay Bands of Odawa Indians (LTBB or Tribe) is a federally recognized Indian tribe and a sovereign government exercising inherent authority over its territory, citizens, and economic enterprises. LTBB submits these comments in response to the Commodity Futures Trading Commission’s (Commission or CFTC) Advance Notice of Proposed Rulemaking concerning prediction markets and event contract derivatives.
The Tribe has a direct and substantial interest in this proceeding for three core reasons:
1. Sports betting and gaming generally are core components of tribal economies, and are subject to comprehensive federal and tribal regulation under the Indian Gaming Regulatory Act (IGRA), 25 U.S.C. § 2701 et seq.;
2. The expansion of sports-based prediction markets threatens to displace the tribal gaming revenues which support our governmental functions and provide tribal employment, undermine tribal regulatory authority, and erode the careful federal state tribal balance Congress established in IGRA;
3. The federal government owes a trust responsibility to LTBB, and a related obligation not to construe federal statues in a manner that abrogates tribal sovereignty absent clear authorization from Congress.
4. The Commodity Exchange Act (CEA), properly interpreted, does not authorize CFTC registered private companies to offer sports betting through derivatives markets, nor does it permit the Commission to preempt state or tribal gaming jurisdiction by regulatory inaction or reclassification.
II. SUMMARY OF POSITION
Event contracts based on the outcomes of sporting events are gaming contracts within the meaning of section 5c(c)(5)(C) of the CEA, are contrary to the public interest, and fall outside the CEA’s historic purpose and lawful scope.
Permitting such contracts to trade on CFTC regulated markets creates a federally sanctioned end run around IGRA, undermining tribal and state sovereignty expressed through tribal state compacts. As a consequence, sports betting contracts structurally displace tribal gaming revenues without congressional authorization, severely compromising Congress’s stated objective of supporting Tribes’ economic self-sufficiency. Finally, permitting sports betting contracts on CFTC-regulated markets circumvents the robust federal, state, and tribal consumer protection and integrity regimes required of and actively implemented in tribal gaming, replacing these only with the CFTC’s process that allows for private companies to self-certify that they are complying with applicable CFTC regulations and state and federal law. Today, the availability of sports event contracts on prediction markets constitutes illegal nationwide sports betting with no regulatory oversight.
Nothing in the CEA authorizes this result. Where congressional enactments intersect with tribal sovereignty, canons of construction dictate that ambiguities be resolved in favor of tribes, not against them.
III. STATUTORY AND SOVEREIGNTY FRAMEWORK
A. The CEA Was Not Enacted to Regulate Gambling
The CEA was enacted to regulate markets that serve commercial risk management, price discovery, and economic stability. It was not intended to authorize nationwide wagering on sporting events.
Congress has repeatedly drawn a line between derivatives tied to economic risk and wagers on discrete events undertaken for entertainment or chance. That distinction is codified in CEA § 5c(c)(5)(C), which expressly empowers the Commission to prohibit event contracts involving gaming that are contrary to the public interest.
B. IGRA Occupies the Field of Tribal Gaming
Congress enacted IGRA to promote tribal economic development and self-sufficiency, and to establish a comprehensive framework for the regulation of Indian gaming.
IGRA reflects a deliberate allocation of authority among tribes, states, and the federal government. Where permitted by law, sports betting occurs in conformance with tribal state compacts negotiated within this framework and approved by the Department of the Interior.
Nothing in IGRA, the CEA, or any subsequent statute authorizes the CFTC to reclassify sports betting as a derivatives product, to make sports wagering available nationwide without regard to state or tribal law, or to displace tribal regulatory authority through preemption theories that Congress has not expressly enacted.
C. Clear Statement Rule and Federal Trust Responsibility
The position that CFTC jurisdiction over swaps and futures automatically preempts tribal gaming regulation is nonsensical. IGRA contains a specific and in-depth regulatory regime for gaming whereas the CEA merely includes the economic risk function and obligation to determine whether swap transactions are contrary to the public interest by virtue of involving gaming or activity that violates federal or state law. The notion that the CEA could preempt IGRA by implication is incompatible with both the CEA and foundational principles of federal Indian law.
As the Supreme Court has repeatedly held, federal statutes are not presumed to preempt tribal sovereignty absent a clear and unmistakable statement from Congress. IGRA expresses Congress’s considered judgment on how gaming—including sports betting—should be regulated in Indian country. Nothing in the CEA indicates an intent to override or displace IGRA, state law, tribal state compacts, or tribal gaming commissions. The Commission therefore should not interpret its authority in a manner that effectively permits nationwide sports betting with no regulatory limits and nullifies tribal regulatory regimes through silence or implication. Any such interpretation would violate settled canons of construction and the federal trust responsibility.
IV. RESPONSES TO QUESTIONS 1–6: CORE PRINCIPLES AND COMMISSION REGULATIONS
A. Core Principle 1: Threshold Authority Versus Technical Guidance
The Commission must distinguish between how the Core Principles apply to lawful contracts and whether certain contracts may be listed at all. Sports based event contracts present a threshold statutory issue concerning the scope of the Commission’s authority, not a question of technical compliance. Guidance alone is insufficient where the statute expressly identifies “gaming” as a basis for categorical exclusion. The Commission’s regulations must make clear that pursuant to the CEA, sports event contracts constitute gaming and therefore are prohibited as a matter of law.
B. Core Principle 2: Access, Conduct, and Contract Enforcement
Prediction markets offering sports contracts present risks fundamentally different from those found in traditional derivatives markets. Contract outcomes are determined by athletic performance rather than market forces; material, outcome relevant information resides with athletes, leagues, and officials who are beyond the reach of market oversight; and dispute resolution depends on third party determinations that are not subject to economic verification. These features undermine the access, conduct, and contract enforcement expectations embedded in Core Principle 2.
C. Core Principles 3 and 4: Manipulation and Surveillance
Sports event contracts are uniquely vulnerable to manipulation through match fixing, strategic underperformance, and improper influence on officiating. The Commission’s enforcement tools are ill suited to the risks posed by sports event contracts. Manipulation often occurs off market and outside Commission jurisdiction, and inside information may be lawfully possessed by non-market actors such as athletes, team insiders, and leagues who are not Commission registrants.
The CFTC lacks jurisdiction over the actors most capable of affecting outcomes, rendering surveillance tools inadequate. Further, remedies are largely retrospective, while the harms to tribal enterprises and public confidence are immediate and irreversible. These enforcement limitations reinforce the conclusion that the appropriate regulatory response is the prohibition of sports event contracts, not supervision.
D. Core Principles 5, 11, and 20: Position Limits, Margin, and Operational Risk
The CFTC’s proposed mitigation measures are wholly inadequate. No combination of position limits, margin models, or technological safeguards can transform sports betting into a legitimate derivatives product.
Allowing margin trading in such contracts would further amplify consumer harm and systemic risk, while offering no offsetting public benefit.
V. PUBLIC INTEREST AND TRIBAL HARMS (Questions 7–14)
A. Public Interest Under the CEA
The CEA emphasizes that its purpose is managing price risk, discovering prices, and protecting market integrity. Sports betting does not serve these purposes. Instead, it constitutes entertainment-based wagering historically regulated under gaming law—including tribal gaming law.
B. Displacement of Tribal Gaming
Allowing sports betting to occur on CFTC regulated markets diverts customers from tribal gaming operations, undermines tribal–state compacts, and deprives tribes of revenues used to fund essential governmental services such as healthcare, housing, education, and public safety. Such displacement, undertaken without congressional authorization, is contrary to the public interest and inconsistent with longstanding federal Indian policy.
C. Economic Purpose
Sports event contracts fail to provide any meaningful economic purpose. They serve no hedging function, do not correspond to commercial exposure; and do not generate economically actionable price signals. They therefore fail to further the purpose of the CEA “to deter and prevent price manipulation or any other disruptions to market integrity; to ensure the financial integrity of all transactions subject to this chapter and the avoidance of systemic risk; to protect all market participants from fraudulent or other abusive sales practices and misuses of customer assets; and to promote responsible innovation and fair competition among boards of trade, other markets and market participants.” 7 US.C. § 5(b).
VI. GAMING UNDER CEA § 5c(c)(5)(C) (Questions 15–22)
A. Sports Betting Is Gaming
Sports competitions are paradigmatic gaming activities. They involve entertainment driven participation and outcomes determined by skill and chance. Further, the competitions are unrelated to economic prices and have long been regulated under federal, state, and tribal gaming law. The Commission should interpret “gaming” consistently with these established frameworks.
B. The CFTC Lacks Critical Responsible Gaming Authority and Capacity
Tribal gaming is subject to employee and vendor licensing and background checks; patron age restrictions; and comprehensive systems of internal controls that are actively monitored and enforced by an independent regulatory body. Gaming is also subject to loss limits, exclusion and self-exclusion mechanisms, and advertising restrictions that protect patron and public interests.
The CFTC lacks both statutory authority and institutional capacity and expertise to replicate these protections, confirming that gaming contracts do not belong on derivatives exchanges.
VII. PROCEDURAL AND ENFORCEMENT CONCERNS (Questions 23–32)
The Commission should not rely on self certification to (1) effectuate de facto policy change or (2) permit markets to launch with the expectation that enforcement will follow later. Public interest determinations should be made categorically and ex ante, particularly where tribal sovereignty and congressionally protected gaming frameworks are implicated.
A. Self Certification Cannot Substitute for Statutory Gatekeeping
The Commission has historically relied on self certification under CEA § 5c(c)(1) to regulate contract markets. Its reliance is premised on an assumption that the products being listed are within the category of instruments Congress has authorized the Commission to regulate, but that assumption breaks down where a contract includes activities—such as gaming—that Congress has expressly identified as grounds for exclusion under § 5c(c)(5)(C).
In practice, allowing sports-based event contracts to proceed via self-certification shifts the burden of statutory interpretation from the Commission to courts, tribes, and states, creating settled market expectations before the Commission has addressed the threshold legality of the product. Finally, it authorizes activity first with a goal of regulating later, despite Congress’s directive in the CEA that contracts determined to involve gaming are contrary to the public interest and therefore “may not be listed.”
This procedural posture is especially inappropriate where tribal sovereignty and congressionally sanctioned gaming regimes are implicated. The Commission may not rely on procedural mechanisms to accomplish indirectly what it lacks authority to do directly.
B. Allowing Listing Before Public Interest Review Creates Impermissible Reliance Interests
Where prediction markets are permitted to list sports event contracts and attract retail participation before the Commission conducts—or declines to conduct—a public interest review, the Commission creates reliance interests that distort subsequent decision making.
This dynamic is particularly problematic with respect to Indian tribes for three main reasons. First, tribal governments and enterprises are not market participants in these derivatives markets and thus lack any meaningful opportunity to mitigate harm once reliance has formed. Second, post listing enforcement or withdrawal of contracts invites claims of arbitrariness that pressure the Commission to tolerate unlawful products. Third, the resulting delay is effectively a policy decision to allow sports betting, notwithstanding unresolved statutory and sovereignty concerns.
The CEA’s 90-day review period should not be construed as a reason to defer action. Instead, it reflects Congress’s expectation that the Commission will act at the front end to prohibit contracts that involve gaming, not after markets have launched.
C. Category Based Determinations Are Necessary
Section 5c(c)(5)(C) of the CEA does not require the Commission to undertake a bespoke analysis of every individual contract where the relevant statutory characteristics are shared across a category of products.
Rather, where contracts reference outcomes of sporting events, serve no hedging or price risk management function, are marketed to the general public as entertainment, the Commission not only may—but should—make categorical public interest determinations. As a form of gaming in an area that is already comprehensively regulated pursuant to a federal statute, sports betting demands a categorical exclusion. Further, allowing sports betting systematically undermines tribal, state, and federal regulatory authority. Providing illustrative examples and a categorical prohibition of sports event contracts would enhance clarity, reduce litigation, and avoid inconsistent treatment across similarly situated tribes and tribal state compact jurisdictions.
VIII. CLASSIFICATION, COSTS, AND COMPETITION (Questions 33–40)
Formal classification as swaps or futures does not cure the fundamental defect: Sports betting is gaming. Even if an event technically qualifies as an “excluded commodity,” § 5c(c)(5)(C) independently obligates the CFTC to bar gaming contracts contrary to the public interest.
Permitting sports betting on Designated Contract Markets distorts competition by favoring large financial platforms over tribal gaming enterprises that operate under rigorous regulatory regimes.
IX. CONCLUSION
The Commodity Exchange Act does not authorize the Commission to transform federally regulated derivatives markets into nationwide sports betting platforms. Sports event contracts are gaming. Gaming contracts are contrary to the public interest under the CEA. And nothing in the CEA authorizes the CFTC to allow them because they undermine tribal sovereignty and the framework Congress enacted in IGRA.
The Little Traverse Bay Bands of Odawa Indians respectfully urges the Commission to adopt clear, categorical limits pursuant to the CEA to ensure sports event contracts are not permitted on CFTC regulated Designated Contract Markets, and ensure the Commission is acting to preserve market integrity, respect tribal self-government, and remain faithful to the statutory boundaries Congress established.
