Ninth Circuit says Kalshi sports contracts on tribal lands are likely illegal gaming

A federal appeals panel ruled that California tribes were likely to succeed in arguing that Kalshi’s sports event contracts amount to unlawful Class III gaming when users enter them from tribal lands. The decision reversed the central portion of a lower court’s refusal to grant a preliminary injunction.

In its Sept. 16 opinion, the Ninth Circuit sent the Indian Gaming Regulatory Act claim back to the district court to consider the remaining factors governing a preliminary injunction. It affirmed the rejection of a separate Lanham Act claim over Kalshi’s advertising.

The case was brought by Blue Lake Rancheria and Chicken Ranch Rancheria of Me-Wuk Indians against Kalshi, KalshiEX, Robinhood Markets and Robinhood Derivatives. Picayune Rancheria of the Chukchansi Indians was dismissed from the appeal without prejudice after oral argument under a joint stipulation.

KalshiEX operates the event-contract exchange and Robinhood distributes the contracts to retail customers. The challenged products paid out when a designated winner prevailed in a sports event and expired worthless otherwise.

The panel found the contracts were offered contrary to the tribes’ secretarial procedures and their California compact.

IGRA creates a federal framework for gaming on Indian lands and requires Class III gaming to be conducted under a tribal-state compact or procedures prescribed by the secretary of the interior. The panel described that category as encompassing forms of gaming outside the statute’s Class I and Class II categories, and stressed the importance of tribes’ exclusive rights to conduct Las Vegas-style Class III gaming free from non-tribal competition.

The ruling rejected Kalshi’s argument that the Unlawful Internet Gambling Enforcement Act displaced IGRA. The panel held that IGRA supplies a means to seek an injunction against improperly conducted Class III gaming on Indian lands, while UIGEA governs payments connected with unlawful internet gambling.

It also rejected the company’s reliance on the Commodity Exchange Act’s exclusive jurisdiction provision. The CEA and IGRA address different questions, the panel concluded, so the commodities law did not prevent the tribes from pursuing an IGRA remedy.

The lower court had denied the injunction after finding that the transactions did not occur on Indian lands and that UIGEA, rather than IGRA, governed Kalshi’s conduct. It further reasoned that UIGEA did not cover the contracts because they were regulated under the CEA.

The panel left that court’s Lanham Act ruling in place. The tribes had challenged Kalshi’s assertion that “Sports Betting [Is] Legal in all 50 States on Kalshi,” but the advertisement was treated as a nonactionable opinion on a disputed legal question. The appellate court agreed that lay opinion about the products’ legality could not establish the false-advertising claim.

The opinion used a hypothetical California resident seeking to wager on a San Francisco Giants game to illustrate its view that relabelling a sports wager as an event contract did not change its character. It noted that sports betting is illegal in California, describing the same bettor, place, stake and contingency despite Kalshi’s different terminology.