Kalshi will be allowed to keep offering its contracts in Indian Country, as a federal judge denied three California tribes an injunction, despite acknowledging that the prediction market “may have found a way around prohibitions on interstate gambling.”
Judge Jacqueline Scott Corley of the U.S. District Court for the Northern District of California on Monday rejected a bid by Blue Lake Rancheria, the Chicken Ranch Rancheria of Me-Wuk Indians, and the Picayune Rancheria of the Chukchansi Indians for an injunction that would have required Kalshi to stop offering sports event contracts on their lands.
5ae8c765-d67d-4464-86c7-aca3d2374a7eJudge Corley did so despite appearing to be sympathetic to the tribes’ arguments on moral grounds, both during a hearing in October, and in her opinion denying the injunction.
“The Court does not take lightly Plaintiffs’ concerns about the effects Kalshi’s activities might have on tribal sovereignty and the Tribes’ finances,” she wrote. “Indeed, by self-certifying the legality of its event contracts in way that insulates its activities from judicial review, Kalshi may have found a way around prohibitions on interstate gambling that were created with the Tribes’ best interest in mind.
“But, on the record currently before the Court, and in light of the Commodity Exchange Act’s self-certification process, Plaintiffs have not met their burden of showing a likelihood of success.”
Judge rejects both of tribes’ arguments
The tribes had called for the injunction on two grounds – that Kalshi’s sports event contracts were an unlawful form of gaming under the Indian Gaming Regulatory Act (IGRA), and that Kalshi had engaged in false advertising, violating the Lanham Act that covered deceptive marketing, by promoting the contracts as legal.
The judge addressed the Lanham Act claim first, and pointed out that Kalshi appeared to believe in good faith that its products were legal, and judges in two other district courts — for Nevada and New Jersey — had come to the same conclusion. A Maryland judge disagreed.
Regarding IGRA, Judge Corley agreed that all the tribes had grounds to make a complaint, despite two of them not having active compacts with the state of California. However, she still determined that the tribes were unlikely to succeed on the merits.
Corley pointed out that the one compact that did exist — for the Picayune Rancheria — and the secretariat procedures that govern the other two tribes’ gaming offerings, did not actually contain any text that says another company can’t offer online gambling on its lands.
The tribes said that as they are the only parties permitted to offer any form of Class III gaming on their territory, “there would be no reason to prohibit third parties from internet gaming on tribal lands.”
Responding to that argument, Corley wrote, “Maybe, but that does not mean the compact or secretarial procedures prohibit defendants’ conduct.”
UIGEA argument helps convince Corley
Like Kalshi’s response motion last month, Corley’s opinion on the IGRA claim leaned heavily on the Unlawful Internet Gaming Act (UIGEA).
Kalshi had argued that it “conducts no business on Indian lands,” as it is based in New York City. For almost all intents and purposes, this claim — that an operator is not offering gaming on Indian lands as it is based off-reservation — is made irrelevant by UIGEA, which allows the federal government to take action against payment processors that facilitate illegal online bets.
However, UIGEA includes a carve-out that specifically notes that contracts offered by a designated contract market (DCM) registered with the Commodity Futures Trading Commission (CFTC) do not count in its definition of a “bet or wager.”
As a result, Kalshi said its contracts were not unlawful internet gambling, and could be offered to customers on tribal lands as long as Kalshi itself was not based there.
The tribes had disagreed that UIGEA was relevant, as the law only existed for the purpose of enforcing existing laws. They pointed to text in the law that said, “No provision of this subchapter shall be construed as altering, limiting, or extending any Federal or State law or Tribal-State compact prohibiting, permitting, or regulating gambling within the United States.”
However, Corley said that while UIGEA may not alter any existing federal law or tribal compact, the tribes had failed to show “any Tribal-State compact provision regulating gambling” that Kalshi suggested had been altered by UIGEA.
Jurisdictional question ‘challenging’ for tribes
Andrew Kim, a partner at Goodwin Law, told InGame that despite Corley’s comments suggesting a general sympathy for the tribes’ cause, he was not surprised by the ruling.
“Even at the hearing, Judge Corley signaled skepticism about the Tribes’ Lanham Act claim, especially given that the Tribes do not compete directly with prediction markets,” Kim said. “As for the IGRA claim, Judge Corley may have been sympathetic to the Tribes’ sovereign interests, but the jurisdictional question — whether sports event contracts are being offered in violation of a Tribal-State compact — was always going to be challenging for the Tribes.
“At the end of the day, the question whether she could hear the IGRA claim was going to be resolved by the text of the law and the text of the compacts/secretarial procedures, not by the judge’s moral considerations.”
Kim added that there is still a long way to go in the case, as the decision only concerned whether to grant an injunction that would have blocked Kalshi from offering its sports contracts while the rest of the case was being decided.
“The case isn’t over—there is still a forthcoming motion to dismiss, and there are claims that haven’t been addressed by this order,” he said. “But the decision illustrates how seemingly technical questions—such as questions about a court’s jurisdiction to hear a case or whether a cause of action has been adequately alleged—play a critical role in these cases.”
In a press release, a Kalshi spokesperson said that its offering and tribal gaming were “fundamentally different.”
“We welcome today’s decision denying the plaintiff tribes’ motion for a preliminary injunction. Kalshi’s nationwide, federally-regulated exchange offers all users a fair and transparent way to trade event contracts. Casinos located on tribal lands offer their customers a fundamentally different product.”
Kalshi faces a similar lawsuit in Wisconsin. The Ho-Chunk Nation of Wisconsin sued both Kalshi and Robinhood in August, citing similar arguments to the California tribes.
