Prediction Markets Are Eating Into Sports Betting, and Tribal Operators May Be the Most Exposed
U.S. sports betting handle growth slowed sharply in 2025, with retail handle falling nearly 12%, and tribal operators appear disproportionately exposed.
It’s no secret that the sports betting industry has spent the better part of seven years telling a growth story, and for most of that period, the story held up. Handle doubled between 2020 and 2023. Online platforms were acquiring customers faster than they could spend money on them, and state legislatures were passing legalization bills with the confidence of people boarding a train already in motion.
The 2025 handle numbers suggest that the train is slowing down. And when you look at where the slowdown is concentrated, it points toward a problem that is more urgent and more structurally complicated for tribal gaming than almost anyone in the industry has publicly acknowledged.
Many federally recognized tribes rely heavily on gaming revenue, which is often protected by exclusivity clauses in their compacts with states. Prediction markets’ status as financial platforms helps them skirt state gambling laws, but also allows them to ignore those exclusive compacts.
The Numbers Tell the Story
Total U.S. sports betting handle grew from $149.7 billion in 2024 to $166.3 billion in 2025, a gain of 11%. That sounds reasonable, except that it’s a considerable drom from 24% growth in 2024 and the 29% growth in 2023. Slowing growth rates is normal in a maturing market. However, the annual slowdown would normally be more gradual each year, the curve flattening out toward whatever the long-term growth rate will be.
That is not what happened. The gap between each year’s growth rate did not shrink. It widened dramatically. A market behaving normally does not produce that shape. Something shifted in 2025, and it shifted faster than the maturation thesis predicted.
The breakdown between channels makes the picture sharper. Online handle grew 12% in 2025, down from 25% the prior year. Retail handle did not just slow. It fell, dropping from $6.85 billion in 2024 to $6.06 billion, a decline of nearly 12%. Retail had been losing ground to online for years in relative terms, but an absolute decline of that magnitude in a single year is a different kind of signal. The physical sports betting window, at a casino counter or a standalone kiosk, is not competing well against a smartphone app. It is competing even less well against prediction markets.
Connecticut, one of the few states where tribal and commercial operators both report to a state regulator and produce public data, illustrates the pattern clearly. Handle grew 24% there in 2024 and just 8.8% in 2025. Connecticut is not a perfect proxy for tribal-only markets, but it is the best one available. Unfortunately, in most states where tribes hold exclusive sports betting rights, there is no state regulator and therefore no public data.
Why Tribal Operators Are Uniquely Exposed
Prediction markets are not just another competitive threat that tribal sportsbooks can address by improving their product or marketing harder. They represent a structural mismatch that goes to the heart of how tribal gaming is organized.
Start with the channel problem. Many tribal sportsbooks are retail-first or retail-only operations. The physical betting window has historically been an asset, a way to capture existing casino foot traffic and serve a customer base that was already on property. In a world where the primary competition was other licensed sportsbooks, that model worked reasonably well. In a world where a bettor can open Kalshi on their phone during halftime and access markets that run continuously regardless of what is on the schedule, the physical window is a liability. Retail handle fell nearly 12% nationally in 2025. Tribal markets where retail is the primary or only channel almost certainly fared worse.
The operator concentration problem compounds this. Fully competitive commercial markets like New Jersey or Colorado offer multiple sportsbooks, aggressive promotions, competitive odds, and continuous product innovation driven by operator rivalry. Tribal markets with a limited number of licensed operators offer fewer of those things. When product selection is constrained, bettors have more reason to seek alternatives.
In 2025, the most attractive alternative was a set of platforms that did not require a state license to operate, were available everywhere, and never ran out of things to bet on.
The Regulatory Architecture Does Not Fit
The deeper problem is not operational. It is legal, and it is one that tribal operators did not create and cannot solve on their own.
The Indian Gaming Regulatory Act was written in 1988. It established a framework in which tribal gaming on tribal lands occupied a distinct regulatory category, governed by tribal ordinances and state compacts, with the National Indian Gaming Commission providing federal oversight. That framework has been enormously successful by the standard it was designed for. Tribal gaming has generated billions of dollars in revenue for tribal governments, funded schools, healthcare, and housing, and provided economic independence that federal transfer payments never could.
IGRA was not designed for a world in which a federally regulated derivatives exchange could offer event contracts on the outcome of NFL games to anyone with a smartphone, in any state, without a state gaming license, and argue with considerable legal support that no state gaming authority has jurisdiction over its operations.
That is the world prediction markets have created. Kalshi is regulated by the CFTC as a designated contract market. It argues, and federal courts in Tennessee and New Jersey have agreed, that the Commodity Exchange Act preempts state gambling laws as applied to its products. The CFTC, under its current leadership, has filed amicus briefs actively defending prediction market platforms against state enforcement actions. Tribes that hold exclusive sports betting rights under state compacts cannot invoke those compact protections against a platform that does not recognize the compact framework as applicable to its business.
This is not a gap that tribes can close through lobbying or litigation in the ordinary sense. It is a jurisdictional conflict between two federal regulatory regimes, one governing Indian gaming and one governing commodity derivatives, that were developed entirely independently of each other and have now been placed in direct competition by the emergence of prediction markets as a sports wagering product. Neither IGRA nor the Commodity Exchange Act was written with the other in mind. Resolving the tension between them will require either congressional action or Supreme Court guidance, neither of which arrives quickly.
The Revenue Consequences Are Real
Tribal gaming revenue funds what matters. On many reservations, casino revenue is the primary source of funding for tribal government operations, healthcare programs, education, elder care, and infrastructure. The compact arrangements that channel a portion of that revenue to states fund public programs well beyond tribal borders.
A sustained decline in sports betting handle in tribal markets does not stay inside a casino’s balance sheet. It ripples into community budgets that have no obvious alternative revenue source.
The 2025 data does not prove that prediction markets caused the slowdown in tribal sports betting. It is consistent with that explanation, and the structural logic supports it, but macroeconomic headwinds were also real, and the data is limited. What the data does prove is that the slowdown was sharper than expected, that retail was hit hardest, and that tribal markets have the characteristics that make them most vulnerable to exactly the kind of competition prediction markets represent.
What Needs to Happen Next
Tribal gaming organizations have begun raising the alarm about prediction markets in policy forums and legal proceedings, but the industry as a whole has been slower than it should be to treat this as the urgent issue the numbers suggest it is.
The most immediate lever is the legal fight already underway. States that have brought enforcement actions against Kalshi and other platforms are, in a meaningful sense, fighting on behalf of tribal interests as well as their own. A federal appellate ruling affirming state preemption authority over event contracts would give tribes considerably more protection than they currently have. A ruling going the other way would remove what little indirect protection exists.
At the federal level, the conversation about prediction market regulation has focused almost entirely on consumer protection, integrity, and the CFTC’s jurisdictional authority. The impact on tribal gaming has been largely absent from that debate. Given what the 2025 data shows, that absence is no longer sustainable.
The Indian Gaming Regulatory Act transformed the economic trajectory of tribal nations across the country. The question now is whether the framework it created can protect that trajectory from a competitive threat it was never designed to address. The early evidence from 2025 suggests the answer is not obviously yes, and that the time to find out for certain is running short.
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