CLARITY Act fails in Senate as tribal gaming wins Ninth Circuit

The Senate vote came first. By the time the Ninth Circuit issued its ruling on the Blue Lake Rancheria case, the legislative path that prediction market companies had spent months building was already closed — the CLARITY Act had failed to advance, and the two results together constitute something more than coincidence of timing. They constitute a strategic inflection.

Prediction markets have operated for the past two years under a simple assumption: that federal preemption was the destination, and that state-level friction was temporary turbulence on the way there. The CLARITY Act was the vehicle for that assumption. Its failure in the Senate does not merely delay the journey — it removes the vehicle while the turbulence intensifies.

The Ninth Circuit's appellate ruling for tribal gaming interests is the part of this that deserves more attention than it has received. Courts establish the terrain on which legislatures eventually have to work. When an appellate court rules that tribal gaming protections apply to event contracts on sporting outcomes, it is not rendering a narrow judgment about one platform in one case. It is placing a legal marker that every future CFTC rulemaking, every state cease-and-desist action, and every congressional attempt to revisit CLARITY will now have to route around. The Commission's own silence on tribal consultation requirements — documented at the September hearing where Scott Crowell's question went unanswered — looks considerably more consequential now that a federal appellate court has given that silence teeth.

There is a version of this story where the CLARITY Act's failure is a temporary setback, the Ninth Circuit ruling is narrowly scoped, and Kalshi and its peers recalibrate and return to Congress in 2027 with a stronger bill. That version is not impossible. It is, however, the version that requires everything to go right in an environment where almost nothing has.

The version worth pricing is different. Federal preemption is not coming in this legislative session, and possibly not in the next one. State attorneys general — Missouri most recently, Montana before its pause, Texas preparing its own institutional position — have learned from the Ninth Circuit that they have more procedural leverage than the prediction market industry's lobbying suggested. The tribal ruling gives any state with significant Native American gaming compacts a tested legal theory to run alongside their own enforcement actions.

The consensus in prediction market commentary has been that federal regulation, when it arrives, will resolve the state conflict in the industry's favor. That consensus may be performing optimism. A CFTC that cannot answer basic jurisdictional questions in a public hearing, combined with an appellate court that has now handed tribes a workable precedent, suggests the resolution — if it comes — will look considerably less clean than the industry's preferred outcome.