The US Court of Appeals for the Ninth Circuit ruled with a 3-0 vote in favor of the Blue Lake Rancheria Indians and the Chicken Ranch Rancheria of the Me-Wuk Indians, who have been suing Kalshi and Robinhood over the latter’s offering of event contracts.
The complaint by the plaintiffs argued that the tribes must retain full sovereignty rights to regulate gambling on tribal land, something that has been allegedly breached by Kalshi with its event contracts offer which have been readily available across the state.
Kalshi Suffers Setback in Case with Californian Tribes
The case has not been an easy one to argue. The two tribes were previously three, with the Picayune Rancheria of the Chukchansi Indians opting out of the race last August. The decision was not entirely unjustified, because the tribes were not guaranteed success.
For example, the Appeals Court’s decision runs contrary to a previous federal district court opinion. According to that court, the tribes’ preliminary injunction could not be granted, as Kalshi was indeed a federally regulated entity and offered derivatives under the Commodity Exchange Act (CEA), which has been what the platform has argued in every case.
The lower court held that the Unlawful Internet Gambling Enforcement Act (UIGEA) and the Commodity Exchange Act (CEA), not IGRA, governed Kalshi’s event contracts, rejecting the tribes’ argument that IGRA applied and once again pointing out that Kalshi is a federally regulated entity, and similarly turned down the tribes’ Lanham Act claim, making it appear that the tribes were losing ground.
However, the court established that the tribes’ argument that they are protected under IGRA, is a valid one, and remanded the case back to the lower court to review the remaining arguments put forward by the tribes.
Lower Court to Review the Case at Direction of Appeals Court
In the opinion issued by the appellate court, Judge Margaret McKeown wrote the following:
“Reversing the district court’s denial of a preliminary injunction in part, the panel held that the tribes were likely to succeed in their claims that Kalshi’s sports-event contracts on tribal lands violated IGRA and the tribes’ gaming ordinances.”
McKeown further noted that the lower court “erred” because Kalshi’s sports-event contracts were “an act of placing a bet or wager,” rather than a federally regulated derivative.
However, the court’s decision is hardly binding for Kalshi, as the court did not order the platform to stop offering its contracts in the state of California, specifically, meaning that there are further legal proceedings on the cards if the tribes or state regulators want to see this happen.
Daniel Wallach, an experienced gaming attorney who has been following prediction market proceedings in the United States, said that the court’s decision was a blueprint for how other similar challenges would play out, specifically when they involve tribes.
Ultimately, tribes may force Kalshi to ensure that it does not accept trades from sovereign tribal land, although this doesn’t mean the tribes would succeed.