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Bonus TL;DR
- A Ninth Circuit panel ruled that Kalshi’s sports event contracts constitute Class III gaming when purchased on California reservations, marking a significant legal hurdle for prediction markets trying to offer sports-related products nationwide.
- The appeals court reversed a lower court’s denial, finding that the location of the user matters regardless of where a platform’s backend infrastructure is hosted, and sent the case back to reconsider the tribes’ preliminary injunction request.
The Ninth Circuit ruled Wednesday that tribes suing Kalshi and Robinhood are likely to succeed on a key claim that sports event contracts bought on California reservations amount to class III gaming on Indian lands.
The decision is a meaningful setback for Kalshi’s push to offer sports-related prediction market contracts nationwide. It also gives new weight to tribal arguments that those products can infringe on their exclusive rights to manage sports betting on their lands in California, where statewide sports betting remains illegal.
The case was brought by the Blue Lake Rancheria and the Chicken Ranch Rancheria of Me-Wuk Indians. The tribes argued that Kalshi and Robinhood were violating California law by allowing users to wager on sporting events while on tribal land.
In the opinion, U.S. Circuit Judge M. Margaret McKeown wrote that Kalshi’s sports event contracts are class III gaming. The panel said the location of the consumer matters, even if Kalshi’s headquarters and technical infrastructure are outside tribal land.
> “Kalshi may be headquartered in New York, and its back-end infrastructure may sit off Indian lands, but a Kalshi consumer can still enter an event contract on Indian lands if she purchases one while on a reservation,” McKeown wrote.
Appeals court sends injunction request back to trial judge
The appeals panel said the tribes were likely to succeed on the merits of their first claim and ordered the lower court to reconsider their motion for a preliminary injunction on that issue.
A federal judge had previously denied the injunction request, finding Kalshi was not bound by the tribal compact because the transactions did not actually occur on tribal land. The Ninth Circuit’s ruling reopens that question.
The panel did, however, agree with the lower court on one advertising-related issue. It said Kalshi’s statement, “Sports Betting: Legal in all 50 States on Kalshi,” was “a nonactionable opinion about legality.”
Les Marsten, an attorney for the tribes, called the ruling “a great victory for the tribes” and said it “upheld the tribes’ ability to govern themselves.”
Why the ruling matters for prediction markets
The decision adds to a growing legal debate over how sports-related prediction markets should be treated in the U.S. gambling and regulatory system.
According to the source article, sports betting is legal in 38 states, but not in California, except that such bets can be placed at Native American casinos. That makes the tribal-land question especially important in this case.
The ruling also arrives after the Third Circuit said in April that states cannot regulate prediction markets because that authority belongs exclusively to the federal government and the Commodity Futures Trading Commission. The Ninth Circuit decision does not resolve that broader conflict, but it raises another pressure point for operators trying to offer sports event contracts across the country.
What comes next is narrower: the trial court must now reconsider whether to grant a preliminary injunction on the tribes’ first claim. It is also still unclear whether Kalshi or Robinhood will seek further review, including a possible appeal to the U.S. Supreme Court.
Source: As reported by Hillel Aron.
