Indigenous Groups File Lawsuit Against Kalshi for Alleged Unlawful Sports Betting on Native Lands
In a recent development, a coalition of California tribes has filed a federal lawsuit against Kalshi and Robinhood Markets, accusing them of offering unauthorized sports betting on reservations. The lawsuit, Blue Lake Rancheria et al. v. Kalshi et al., is significant as Kalshi's ability to offer a sports product may depend on the outcome of this federal litigation.
According to the complaint, Kalshi's so-called "event contracts" are effectively disguised sports wagers that violate the Indian Gaming Regulatory Act (IGRA), tribal-state compacts, and state constitutions. The tribes argue that these constitute Class III gaming under IGRA and infringe upon tribal sovereignty.
While Kalshi argues that its offerings are lawful futures markets regulated by the Commodity Futures Trading Commission (CFTC) and therefore not subject to state or tribal gambling laws, these arguments have faced legal challenges. State regulators and courts have increasingly scrutinized Kalshi’s contracts, debating whether federal commodity futures law preempts state and tribal gaming regulations.
For instance, Maryland regulators demanded Kalshi cease sports betting contracts, and a judge there expressed skepticism about Kalshi’s federal preemption defense. Kalshi's prediction market, particularly its sports event contracts, is considered gambling under the Indian Gaming Regulatory Act (IGRA) by certain federally recognized tribes and related legal entities.
Under IGRA, Kalshi’s event contracts on sports outcomes are viewed by some tribes and regulators as illegal gambling (Class III gaming) because they resemble sports wagers, violating tribal exclusivity and compacts. The tribes claim that Kalshi is undermining their sovereignty and violating their gaming ordinances.
In addition to the allegations of illegal gambling, the tribes accuse Kalshi and Robinhood of engaging in racketeering by consciously disregarding or actively circumventing regulatory concerns. The tribes are seeking an injunction to prevent Kalshi and co-defendant Robinhood Markets from enabling people on reservations to place bets through Kalshi.
It is important to note that IGRA includes a structure for "Class III gaming," which has been interpreted to include sports betting. For Class III gaming to be conducted on Indian lands, procedural steps, including the promulgation of a tribal ordinance approved by the National Indian Gaming Commission, are required.
Kalshi offers other types of event contracts, such as predicting who President Trump will pardon this year, and sports-based event contracts, such as predicting the pro baseball champion, with prices varying for each outcome. The company views itself as a facilitator of transactions and holds funds until the event that produces the outcome occurs.
This lawsuit marks a significant turning point in the regulatory landscape of prediction markets and sports betting, particularly on Indian lands. The outcome of this case could have far-reaching implications for the future of Kalshi's operations and the broader prediction market industry.
- The coalition of California tribes has filed a federal lawsuit against Kalshi and Robinhood Markets, alleging unauthorized sports betting on reservations.
- The tribes argue that Kalshi's event contracts violate the Indian Gaming Regulatory Act (IGRA), tribal-state compacts, and state constitutions, constituting Class III gaming under IGRA.
- Kalshi, in its defense, claims its offerings are lawful futures markets regulated by the Commodity Futures Trading Commission (CFTC), not subject to state or tribal gambling laws.
- Maryland regulators have demanded Kalshi cease sports betting contracts, with a judge expressing skepticism about Kalshi’s federal preemption defense.
- The lawsuit includes allegations of racketeering by Kalshi and Robinhood, who are accused of disregarding or circumventing regulatory concerns.
- The outcome of this federal litigation could significantly impact Kalshi's sports betting operations and the broader prediction market industry.
- In addition to sports-based event contracts, Kalshi offers predictions on general-news topics, such as predicting who President Trump will pardon this year.
