The US Court of Appeals for the Ninth Circuit recently determined that Kalshi’s offering of sports event contracts likely breaches federal law when accessed from tribal lands. This decision stems from allegations by two California tribes, the Blue Lake Rancheria and the Chicken Ranch Rancheria of Me-Wuk Indians, who claim that Kalshi’s “event contracts” equate to unauthorized gaming under the Indian Gaming Regulatory Act (IGRA). The appellate court overturned a previous district court decision, granting a preliminary injunction against Kalshi’s activities.
Kalshi operates as a derivatives exchange, sanctioned by the Commodity Futures Trading Commission (CFTC), providing “event contracts” that resemble swaps based on real-world events, including sports betting. Kalshi has contended that the Commodity Exchange Act (CEA) preempts any relevant state regulations. However, in California, sports betting remains confined to tribal lands, with tribes retaining exclusive regulatory authority over gaming operations. Under IGRA, Class III gaming, which encompasses activities such as casino-style games and sports betting, requires authorization via tribal ordinance or a tribal-state compact for legality on Indian lands.
The tribes argued that when individuals participate in these contracts while on tribal lands, the activity effectively becomes unregulated sports betting, thus breaching IGRA. The court, emphasizing a functional viewpoint, evaluated IGRA as an instrument to regulate the actual gaming activities rather than their labels, citing the striking resemblance of Kalshi’s offerings to traditional sports bets here.
The verdict highlights that users can engage with these contracts on tribal lands without tribal consent, meaning the tribes are likely to prevail in claiming that such activities contravene their established procedures. Notably, the court asserted that while the CEA provides regulatory jurisdiction over derivatives generally, IGRA governs gaming instances situated on Indian reservations. Consequently, the tribes hold a valid cause of action to impede Kalshi’s operations, which the lower court had incorrectly dismissed.
The significance of tribal gaming cannot be overstated, as it garnered $43.9 billion in 2024, proving instrumental in supporting numerous Native communities. Historical precedents, such as the Supreme Court’s ruling in California v. Cabazon Band of Mission Indians in 1987, affirmed the autonomy of tribes to regulate games on their lands in the absence of state prohibition. In reaction, Congress introduced IGRA in 1988 to foster tribal economic prosperity and governance strength, marking a pivotal moment in tribal-state relations. Kalshi’s case underscores the ongoing complexities in balancing federal, state, and tribal interests within the gaming sector.