New Mexico lawmakers warned prediction markets could divert tribal gaming revenue

New Mexico lawmakers heard warnings that fast-growing prediction markets could divert gambling from tribal casinos, weakening a major source of funding for tribal services and the state’s general fund.

At an Indian Affairs Interim Committee hearing, tribal and gaming representatives said phone-accessible platforms such as Kalshi and Polymarket threaten gaming rights negotiated by tribes and New Mexico, as well as the ability of tribes and states to regulate gambling within their boundaries. Prediction markets let users take positions on future outcomes including sports, elections and economic data.

The financial stakes are substantial. Thirteen New Mexico tribes generated $896 million in adjusted net win in fiscal 2025, while tribal gaming contributed more than $151 million to the state general fund. Adjusted net win measures gaming-machine revenue after prizes and regulatory fees, but before operating expenses.

Federal law directs tribal gaming proceeds toward purposes including economic development and tribal or local government services. At the hearing, representatives pointed to early education, housing and healthcare as among the services supported by New Mexico tribal gaming revenue.

Eugenia Charles-Newton, a Navajo Nation Council delegate, told lawmakers that gaming money is reinvested in tribal communities, while prediction-market revenue goes to the companies that run the platforms. She also raised concerns about age verification, saying a child could potentially wager through a website. Prediction-market platforms are generally classified as federal financial exchanges rather than conventional gambling sites and can market to people aged 18 and older.

That has sharpened concern over the contrast with New Mexico’s gaming rules. The state Department of Justice has alleged that Kalshi offered sports-related contracts to New Mexico residents without a gaming licence and allowed people aged 18 to 20 to participate, although the state’s minimum gaming age is 21. Kalshi argues that federal commodities law puts its contracts outside state and tribal gambling rules.

Lawmakers also discussed whether New Mexico should tax prediction-market earnings. Emiliano Aguirre suggested such a levy might discourage use, but Elizabeth Homer, regulatory counsel for the Indian Gaming Association, stressed that the idea was only conceptual, not an official recommendation. Legislators questioned how a tax would interact with tribal-state compacts, how online activity on tribal land could be tracked and who would collect any revenue.

Sen. Angel Charley doubted that taxation alone would deter users with gambling addiction, saying people seeking a gambling “fix” may do what is necessary to obtain it. New Mexico has nearly four times the national rate of problem gambling, according to Source New Mexico.

The committee discussion unfolded alongside two legal challenges to Kalshi. The Mescalero Apache Tribe and the Pojoaque, Sandia and Isleta pueblos contend that the company’s sports-event contracts amount to unlicensed sports betting on tribal lands and violate exclusive gaming rights under federal law and state agreements.

As we reported on Sept. 4, those tribes completed arguments seeking an injunction to stop Kalshi operating within their New Mexico tribal boundaries. The tribal plaintiffs argue that online contracts available to adults over 18 undermine compact rules under which sports bets may be placed in person at tribal casinos only by people aged 21 and older.

Attorney General Raúl Torrez filed a separate state lawsuit in June against Kalshi Inc. and KalshiEX LLC. The suit seeks an injunction against the company’s alleged sports-related wagering operations, which the state says function as a sportsbook and undermine its regulated gaming system and the state’s sovereign authority to regulate gambling within its borders.

The dispute comes amid a rapid expansion of the sector. Combined monthly trading volume at Kalshi and Polymarket rose from about $890 million in July 2024 to $53 billion in July 2026. Kalshi began offering sports bets in January 2025, and sports-related contracts made up about 87% of its nationwide bets as of May, according to New Mexico’s complaint.

Federal courts have split on whether federal commodities law displaces state and tribal gambling regulation. One federal appeals court sided with Kalshi in a dispute with New Jersey, while another backed Nevada regulators and two California tribes, leaving New Mexico’s challenge within a wider unresolved contest over authority to police sports-event contracts.