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A federal appeals court dealt Kalshi a legal setback in California recently by ruling that its sports event contracts are gambling under federal tribal gaming law when offered on Native American land.
The Sept. 16 decision by the U.S. Court of Appeals for the Ninth Circuit strengthened the ability of tribes to restrict sports betting on their reservations even when the contracts are offered via federally regulated prediction market companies. The unanimous court ruling came in a lawsuit brought by Blue Lake Rancheria and Chicken Ranch Rancheria of Me-Wuk Indians against Kalshi and Robinhood.
The tribes argued that sports contracts amounted to unauthorized gambling on their lands, violating the Indian Gaming Regulatory Act (IGRA), which governs tribal gaming operations. Kalshi argued that its event contracts are financial products regulated exclusively by the Commodity Futures Trading Commission (CFTC) and are not subject to tribal restrictions.
However, the appeals court maintained that sports event contracts qualify as Class III gaming under IGRA. It also rejected Kalshi’s argument that transactions occur outside tribal lands because its trading infrastructure is located elsewhere.
“Today’s Ninth Circuit ruling is a major victory for tribal sovereignty and for the integrity of the Indian Gaming Regulatory Act,” California Nations Indian Gaming Association (CNIGA) Chairman James Siva said in a statement. “The court recognized what tribes have said from the beginning: sports wagers do not become financial instruments simply because a company calls them ‘event contracts.’”
The court reversed part of a lower court decision denying the tribes’ request for a preliminary injunction and returned the case for further consideration. Following the ruling, Kalshi voluntarily blocked access to its prediction markets on three California tribal reservations, the plaintiffs, as well as the Picayune Rancheria of the Chukchansi Indians. The ruling does not prohibit Kalshi from operating elsewhere in the state.
New partnerships with Kalshi reveal tribal divide
Less than a month after the Ninth Circuit decision and setback for Kalshi, the company announced partnerships with four Native American tribes, including three in California, highlighting tribal divisions over the prediction market industry’s expansion, especially in states where sports betting is illegal.
The tribes involved include California’s Greenville Rancheria, Kletsel Dehe Wintun Nation and Alturas Indian Rancheria, along with Oklahoma‘s Alabama-Quassarte Tribal Town. Each tribe will operate its own branded prediction market platform, while Kalshi provides trading technology and liquidity. The agreements follow a September partnership announcement with Louisiana‘s Tunica-Biloxi Tribe.
The tribes emphasized economic development in partnering with Kalshi. Michael Stopp, a Cherokee Nation member and VP of Economic Development for Alabama-Quassarte Tribal Town, said that some tribes have been “left out of lucrative gaming markets.”
“These markets offer tribes a chance to participate in an emerging industry, especially those whose geography has limited revenue generation,” said Stopp. “Respect for tribal sovereignty means respecting each nation’s right to evaluate that opportunity and decide what best serves its citizens. Sovereignty cannot mean protecting opportunity for the haves while closing the door on the have-nots.”
The new deals drew criticism from CNIGA, which has opposed prediction markets over concerns about tribal sovereignty and gaming rights. The organization released a statement the day after the announcement.
“The decision by several California Tribal Nations to partner with Kalshi is disappointing, but it doesn’t change the fact that this activity is still illegal,” the statement read. “The Ninth Circuit recognized that Kalshi’s sports-event contracts constitute Class III gaming under the Indian Gaming Regulatory Act and thus violate the law in California. Whoever offers the sports betting contract is irrelevant.”
The contrasting positions highlight a growing divide among tribes. While some are fighting to protect their gaming rights through the courts, others see prediction markets as an opportunity to develop new sources of revenue.
