A federal appeals court has sided with two California tribes in a fight over prediction market contracts, according to Reuters. This marks the second setback in less than a month for Kalshi, the largest regulated prediction market operator in the U.S.
Key Takeaways
- Ninth Circuit judges backed two California tribes seeking to block Kalshi sports contracts tied to tribal lands.
- The panel found the tribes likely showed violations of federal gaming law and their own ordinances.
- The ruling follows another August setback, when Nevada regulators gained oversight over Kalshi's sports-related contracts.
A three-judge panel at the 9th U.S. Circuit Court of Appeals in San Francisco ruled on Wednesday that the Blue Lake Rancheria and the Chicken Ranch Rancheria of Me-Wuk Indians are entitled to a preliminary injunction blocking prediction markets platform Kalshi from offering sports-related event contracts tied to their lands.
The panel found the contracts would likely violate the federal Indian Gaming Regulatory Act (IGRA), along with their own tribal gaming ordinances.
Circuit Judge Margaret McKeown, writing for the panel, determined that a lower court had erred when it denied the tribes' request for an injunction last November. According to the ruling, each event contract Kalshi listed amounted to a bet or wager that had not been authorized either by the Interior Secretary or by the tribes' own gaming rules. The case now returns to U.S. District Judge Jacqueline Scott Corley in San Francisco for further proceedings.
“Today's Blue Lake opinion is a significant additional blow to the pro-sports event contract prediction market operators,” Joshua Kirschner, a Holland & Knight partner, told Covers.
“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 decision follows an Aug. 28 ruling from the same appeals court that placed Kalshi under the oversight of Nevada's gaming regulators. That was another setback for the company's argument that its contracts fall outside state and tribal gambling law.
A coalition of 27 states and Washington, D.C., backed the tribes in the appeal, arguing that allowing Kalshi's approach to stand would weaken their ability to police illegal gambling activity within their borders.
A Kalshi spokesperson told Reuters it may appeal the decision.
