California Tribal Leaders Seek Injunction on Prediction Market Leader Kalshi

Futures prediction platform Kalshi has faced cease-and-desist orders from gaming state regulators and now has to contend with an injunction from three California tribes stating that its platform is not legal on tribal lands.

Not On Our Land

Despite a blizzard of legal challenges, prediction market leader Kalshi has thus far weathered the storm, scoring positive rulings from federal courts against state regulators who contend that sports betting contracts offered by Kalshi are not licensed in their respective states and therefore are illegal.

However, Kalshi and others like Polymarket have argued that they are licensed and governed under federal law by the Commodity Futures Trading Commission (CFTC), which has not intervened to prohibit them from offering futures contracts in all 50 states. A recent legal setback by a Maryland state court has further muddied the waters, but as of this writing, Kalshi is free to roam anywhere in the United States.

Nevertheless, three California tribes, including the Blue Lake Rancheria, Chicken Ranch Rancheria of Me-Wuk Indians, and Picayune Rancheria of the Chukchansi Indians, have filed a lawsuit asking a judge to prohibit Kalshi from offering its contracts to those on tribal lands.

The lawsuit contends that tribal lands are sovereign nations and off-limits to any trading platform not compliant with tribal laws.

The tribes further contend that Kalshi and other trading platforms do not conform to the Indian Gaming Regulatory Act and other gaming laws, which makes them illegal on their lands.

The recent filing opines that “states, under federal oversight, have the exclusive right to regulate gaming on Indian lands.”

Furthermore, “Kalshi’s contracts unequivocally do not comply with IGRA. Thus, even if the Court were to determine that Kalshi’s self-certifications comply with the CEA (Commodity Exchange Act), Kalshi’s activity would still constitute class III gaming activity located on Indian lands conducted in violation of IGRA.”

Legal Setbacks

Kalshi and other similar platforms like Polymarket have welcomed several political heavy hitters onto their boards, like Donald Trump Jr., who also happens to be an investor in Polymarket. Therefore, those companies are counting on favorable rulings because of their legal arguments and the political powers that support them.

Yet, the legal victories that Kalshi enjoyed ended recently when a Maryland court ruled that Kalshi was required to “establish that Congress clearly and manifestly intended to strip states of their authority to regulate gambling if the company offering such wagering opportunities has been approved to sponsor a designated contracts market for commodities trading.”

Kalshi has been arguing that its adherence to the Commodity Exchange Act (CEA) allows sports event contract trading because it is a peer-to-peer contract whose price is dynamic, unlike a sports bet where the bettor plays against the house and the odds are locked in at the time of the wager.

Kalshi has appealed the ruling, and the state has until October 15th to respond to its brief. Legal squabbles continue with regulators in Nevada and New Jersey as well. This legal showdown is far from finished, and if Maryland regulators score a victory, along with the tribes, it could have deleterious effects for futures contract trading in other markets.