A federal appeals court has backed two California tribes in their legal challenge against Kalshi’s sports event contracts on tribal lands, reversing a key part of an earlier district court decision and sending the request for a preliminary injunction back for further consideration.
The unanimous three-judge panel of the 9th U.S. Circuit Court of Appeals found that Blue Lake Rancheria and Chicken Ranch Rancheria of Me-Wuk Indians were likely to succeed on their claims that Kalshi’s sports-related contracts violate the Indian Gaming Regulatory Act (IGRA) when users enter them from tribal territory. The tribes sued Kalshi and Robinhood, arguing that the contracts interfere with the regulatory structure governing gaming on their lands.
The dispute centers on Kalshi’s federally regulated event-contract business. Users can take positions on the outcomes of sporting events through contracts traded on the platform. The tribes maintain that these transactions function as sports bets when offered on their lands and therefore fall within the federal framework that governs tribal gaming.
Appeals Panel Reverses Key Part of Lower Court Decision
The federal district court had previously denied the tribes’ preliminary injunction request. It concluded that the challenged transactions did not occur on tribal lands and also accepted arguments concerning the interaction between federal gambling statutes and the Commodity Exchange Act.
The Ninth Circuit reached a different conclusion on the IGRA claims. Its opinion [pdf] states that the tribes had demonstrated a likelihood of success in showing that the sports event contracts qualify as class III gaming activities. The panel also found that contracts entered by users while physically present on tribal territory can be considered gaming activity located on Indian lands.
Circuit Judge M. Margaret McKeown illustrated the court’s reasoning by comparing a Kalshi transaction with a conventional sportsbook wager:
“Imagine a user standing on the floor of the Blue Lake Casino Hotel who downloads Kalshi and DraftKings, a classic online sports betting app,” McKeown wrote. “On Kalshi, she buys a $100 contract that pays if the San Francisco Giants win. On DraftKings, she wagers $100 on the same outcome. The bettor, the place, the stake, and the contingency remain the same. The only thing that changes is Kalshi’s vocabulary. Kalshi may reshuffle the cards, but it cannot change the hand: Its sports event contracts are class III gaming.”
The court also rejected the argument that Kalshi’s off-reservation infrastructure meant the activity occurred entirely outside tribal territory. Its opinion explains that a customer can enter an event contract while located on a reservation, meaning at least part of the challenged gaming activity can take place on Indian lands.
Attorney Les Marsten, who represents the tribes, described the ruling as “a great victory for the tribes,” adding that it “upheld the tribes’ ability to govern themselves.”
Federal Gaming Law Remains Central to the Case
The Ninth Circuit’s published opinion, filed September 16, explains that IGRA regulates class III gaming conducted on Indian lands and provides tribes with a mechanism to challenge gaming activity that conflicts with applicable tribal-state compacts or federal secretarial procedures. The panel concluded that the tribal gaming ordinances did not authorize Kalshi’s sports event contracts.
The judges also addressed Kalshi’s reliance on federal commodities law. They concluded that the Commodity Exchange Act and IGRA deal with separate regulatory questions. The Commodity Futures Trading Commission has jurisdiction over covered derivatives trading on designated contract markets, while IGRA governs class III gaming activity located on Indian lands, according to the court.
According to Reuters, Kalshi spokesperson Elisabeth Diana said the company may appeal the decision.
“This ruling is hard to square with other federal laws, which leave regulation of on-exchange derivatives trades exclusively to the [Commodity Futures Trading Commission],” Diana said. Reuters also reported that Robinhood was evaluating its legal options after the ruling.
Robinhood acts as a retail distributor for Kalshi products and routes customers’ event-contract orders through the prediction market operator. The company had argued that restrictions on the contracts could cause it to lose substantial business.
The appeals court preserved one part of the district court’s decision. The tribes had challenged Kalshi advertising that stated, “Sports Betting: Legal in all 50 States on Kalshi.” The Ninth Circuit agreed with the lower court that the statement represented a lay opinion concerning legality and therefore could not support the tribes’ Lanham Act claim.
Kalshi Faces Separate Regulatory Disputes
The California tribal dispute comes shortly after another Ninth Circuit decision involving Kalshi. On August 28, the appeals court ruled that Nevada gaming regulators could exercise oversight over the company’s sports-related prediction contracts, giving Kalshi its second significant appeals-court setback in less than a month.
The tribal case also attracted participation from governments outside California. A bipartisan coalition representing 27 states and Washington, D.C., supported the tribes, arguing that Kalshi’s position could affect government authority over gambling activity.
Joshua Kirschner, a Holland & Knight partner, described the decision as another important development for sports prediction markets.
“Today’s Blue Lake opinion is a significant additional blow to the pro-sports event contract prediction market operators,” Kirschner said.
“It establishes that prediction market sports event contracts are not just potentially subject to state gambling regulation, but also independently violate IGRA when offered on tribal lands without tribal authorization. The ruling further entrenches the Ninth Circuit’s hostility to the business model used by Kalshi and others, weakens the en banc petition in Assad, and adds a wholly distinct legal theory (tribal gaming sovereignty) to the growing arsenal of claims against prediction market operators.”
The Ninth Circuit affirmed part of the lower court decision, reversed the portion involving the IGRA claims and remanded the case. The district court must now consider the remaining factors relevant to the tribes’ request for a preliminary injunction.