Ninth Circuit Panel Presses Kalshi on Tribal Lands Sports Contracts in IGRA Challenge

A federal appeals panel sharply questioned Kalshi during a hearing over whether its sports-event prediction contracts differ materially from conventional sports betting, as three California tribes seek to block the platform from offering those contracts on their reservations. The hearing, held Friday before the Ninth Circuit, stems from an appeal filed by Blue Lake Rancheria, Chicken Ranch Rancheria of Me-Wuk Indians, and Picayune Rancheria of the Chukchansi Indians, who are trying to revive a preliminary injunction that a district judge denied in November 2024.

Tribes’ IGRA Argument

Lester Marston, attorney for the tribes, argued that even if Kalshi’s conduct is legal off tribal land, “the moment that you take that legal conduct, and you engage in that exact same conduct on the reservation, they’re committing a crime under 1166, and they’re violating the civil provisions of the IGRA.” Section 1166 of the federal criminal code generally applies state gambling laws in Indian country as federal law, and because California prohibits sports betting, Marston contended that Kalshi’s contracts amount to unauthorized Class III gaming. He further argued that the relevant location for determining where a wager occurs is where the patron places it, not where the servers process the transaction—a position grounded in Michigan v. Bay Mills Indian Community.

Kalshi’s Jurisdictional Defense

Kalshi attorney Grant Mainland urged the court to avoid deciding the broader conflict between federal commodities regulation and Indian gaming law, maintaining that the tribes had not identified any tribal-state compact language that Kalshi violated. “Do the plaintiff tribes have the right to sue? Under IGRA’s plain text, the answer is no,” Mainland said. He warned that allowing the suit to proceed would create “a 240 tribe exception” to the Commodity Futures Trading Commission’s exclusive jurisdiction over designated contract markets. Judge Richard Paez countered that such an exception might not be unreasonable, noting that “the whole tribal situation is a very complicated relationship.”

Judge M. Margaret McKeown pressed Mainland on the practical comparison: if a person on tribal land buys a Kalshi contract tied to a San Francisco Giants victory while also placing the same wager through DraftKings, why should the former be allowed? Mainland replied that designated contract markets are regulated differently from sportsbooks, but he later acknowledged the contracts “has some similarity” to sportsbook wagers.

False Advertising and District Court Ruling

The tribes also brought a Lanham Act false-advertising claim, alleging Kalshi misled consumers by marketing its sports contracts as “legal in all 50 states.” McKeown raised the claim during oral arguments, highlighting the tension between Kalshi’s use of sports-betting language in its ads and its assertion that the contracts are federally regulated derivatives, not gambling. The district judge had rejected this claim, finding no false or misleading statement likely to support the claim.

U.S. District Judge Jacqueline Scott Corley’s November 2024 order denying the preliminary injunction concluded that the tribes had not shown they were likely to prevail, in part because they had not identified compact language prohibiting Kalshi’s conduct. Corley also found that the Unlawful Internet Gambling Enforcement Act governed the internet transactions and excludes CFTC-registered markets from its definition of a bet or wager. The Ninth Circuit has no set deadline for a decision; it could affirm the denial, reverse and send the case back for reconsideration, or resolve the appeal on the narrower standing question.

Context and Implications

Robinhood, a co-defendant because its app allows trading of Kalshi-listed contracts, argued that an injunction against Kalshi would also harm its prediction market business. The underlying district court case is stayed pending the Ninth Circuit’s ruling, which will also affect related Nevada appeals. Similar tribal challenges are pending elsewhere: a Wisconsin judge allowed the Ho-Chunk Nation’s IGRA claims to proceed but denied an injunction, and four New Mexico tribes filed a separate suit in May. A ruling for the California tribes could strengthen efforts to require prediction market platforms to block access from reservations, even if contracts remain available elsewhere in a state.