A federal judge in Wisconsin has dealt a blow to Kalshi, signaling that the Ho-Chunk Nation stands a strong chance of succeeding in its effort to stop the prediction market operator from offering sports event contracts on tribal land.
U.S. District Judge William M. Conley in Madison ruled Monday that the tribe's lawsuit can proceed, finding that it has demonstrated a likelihood of success on the merits, according to Bloomberg.
Key Takeaways
- A Wisconsin federal judge will allow the Ho-Chunk Nation's lawsuit against Kalshi to proceed.
- The tribe argues Kalshi's sports-event contracts violate IGRA and its exclusive Class III gaming rights.
- The ruling contrasts California's Kalshi decision and strengthens tribal challenges against prediction markets.
The Ho-Chunk Nation, a federally recognized tribe that operates casinos across Wisconsin through a state compact, has argued Kalshi's sports event contracts constitute illegal gambling under the Indian Gaming Regulatory Act (IGRA).
The tribe contends the compact gives it exclusive authority over Class III gaming on its lands and that Kalshi's products cross that boundary.
Kalshi, in turn, sought dismissal of the case. The operator argued it is regulated by the Commodity Futures Trading Commission (CFTC), which puts it beyond tribal jurisdiction. The company maintained IGRA was never intended to reach federally regulated derivatives markets and that Congress has explicitly consolidated oversight of such exchanges under the Commodity Exchange Act.
The Ho-Chunk Nation isn’t the only tribe that has recently sued Kalshi and other prediction market operators. In California, several tribes failed to be granted an injunction against Kalshi. In Tennessee, a judge also rejected a request from state tribes to file a friend-of-the-court brief, and Kalshi ultimately prevailed in its preliminary injunction.
Monday's ruling in Wisconsin stands in contrast to the California and Tennessee decisions and appears to be the first of its kind to favor a tribal nation in a challenge against Kalshi. The case highlights a broader legal clash that has spread across multiple states as Kalshi and Robinhood, its platform partner, push their sports contract products into markets where tribes and state regulators argue they do not belong.
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CFTC takes Wisconsin to federal court
The courtroom setback for Kalshi isn’t the only Badger State-related prediction market news to occur in recent months. The CFTC sued Wisconsin and key state officials in April, challenging the state's decision to pursue legal action against five prediction market operators it accused of running unlicensed sports betting operations.
Wisconsin Attorney General Josh Kaul filed three civil suits in Dane County Circuit Court on April 23 targeting Kalshi, Polymarket, Crypto.com, and affiliated companies, including Robinhood and Coinbase. Court filings show Kalshi earns more than $1 billion annually from sports contracts, which make up roughly 90% of its revenue.
The CFTC's complaint, filed jointly with the Justice Department in federal court, accuses Wisconsin of encroaching on the agency's sole authority over derivatives markets. The agency is seeking a court ruling that state gambling laws do not apply to federally registered exchanges and has asked for a permanent injunction blocking Wisconsin from taking further enforcement action against these platforms.
Wisconsin is the fifth state to face a lawsuit from the CFTC, which previously filed actions against Arizona, Connecticut, Illinois, and New York.
