Ninth Circuit backs two tribes against Kalshi sports contracts on tribal land

On 16 September, the Ninth Circuit Court of Appeals found two tribes likely to succeed on their claim that, when users enter Kalshi's sports event contracts while on tribal land, the contracts breach the Indian Gaming Regulatory Act (IGRA). Operators and affiliates that distribute or promote such contracts could need to check how user location is handled.

The case now returns to a district court.

What happened

The court filed its opinion on 16 September in Blue Lake Rancheria v. Kalshi, Inc., an appeal brought by two tribes: Chicken Ranch Rancheria of Me-Wuk Indians and Blue Lake Rancheria. Robinhood's derivatives unit acts as a retail distributor, passing customer orders on to Kalshi.

The panel found the tribes likely to prove their case on three points:

• The contracts are class III gaming under IGRA.
• A contract counts as sited on Indian lands if the user places it from within tribal territory.
• No tribal ordinance authorised Kalshi to offer the contracts, which the panel treated as a violation of the tribes' secretarial procedures and ordinances.

Judge M. Margaret McKeown, who wrote the opinion, wrote: "Kalshi may reshuffle the cards, but it cannot change the hand: Its sports event contracts are class III gaming."

Kalshi had argued that it could not violate compacts to which it is not a party. The panel rejected that view, saying IGRA allows tribes to seek to stop alleged unauthorised class III gaming on their lands.

Kalshi also argued that the Commodity Exchange Act (CEA) gives the CFTC exclusive jurisdiction because the contracts trade on a designated contract market. It also contended that the tribes' IGRA claims were displaced by the Unlawful Internet Gambling Enforcement Act (UIGEA). The panel rejected both arguments:

• On UIGEA, it said that statute concerns payments linked to unlawful internet gambling, whereas IGRA provides the legal basis for stopping class III gaming that is conducted improperly.
• On the CEA, it held that the CEA's exclusive jurisdiction did not extend to Kalshi's sports event contracts, concluding that the CEA and IGRA address two different questions. It cited its 28 August decision in KalshiEX v. Assad, which found Kalshi's sports event contracts are likely not swaps under the CEA.

The panel upheld the lower court's refusal of a Lanham Act claim directed at Kalshi's advertisement saying sports betting is legal across all 50 states. It held that a lay opinion about legality cannot support such a claim.

The case was returned to the US District Court covering the Northern District of California.

Why it matters

Operators, affiliates and platforms that distribute or promote sports event contracts could want to check whether their geolocation, onboarding and marketing treat users on tribal lands differently from other users. The panel's reasoning ties the location of a contract to where the user enters it. That makes the location of Kalshi's back-end systems unlikely to settle the question in tribal-land disputes.

The case shows that intermediaries could be drawn into IGRA claims alongside the exchange itself.

The national question remains open. The opinion notes that what the CEA's exclusive jurisdiction means is subject to much disagreement in other proceedings, including a Third Circuit decision holding that the CEA preempts state gaming regulations because Kalshi's event contracts are swaps. Notably, none of these cases involves event contracts on tribal lands. States, tribes and licensed gaming stakeholders could cite the ruling when contending that CFTC oversight does not take event contracts outside gaming law.

The finding is preliminary. The panel assessed only the likelihood of success.