Arguing that despite the efforts from Wisconsin’s Ho-Chunk Nation to “affix the ‘sports betting’ label” to its sports event contracts, the U.S. Congress allows for trades made on a designated contract market (DCM) to be exempt from tribal gaming laws, Kalshi Monday filed a brief in support of dismissing the tribe’s case to keep it from operating on Indian land.
In the case in the U.S. District Court for the Western District of Wisconsin, the Ho-Chunk Nation sued Kalshi, and partner Robinhood, in August, arguing that the companies are violating the Indian Gaming Regulatory Act (IGRA) by operating on tribal land. Since then, Kalshi and Robinhood filed motions to dismiss, the tribes filed for a temporary restraining order (TRO) to keep the platforms from operating, the tribes filed a brief in opposition of dismissal, Kalshi requested an expedited discovery timeline, and 16 tribes signed and filed an amicus brief in support of a TRO.
The judge, Anita Marie Boor, has not ruled on the request for a TRO, and all parties continue to argue about which federal law trumps another as the case continues.
After denying Kalshi’s request for expedited discovery, Boor Dec. 9 set a trial date of May 24, 2027. Between now and then, both sides will be required to file myriad documents, including settlement letters and disclosures, as well as participate in at least two pre-trial conferences.
Kalshi: Ho-Chunks using failed argument
The Ho-Chunks are arguing that Kalshi and Robinhood are illegally offering sports betting via their sports event contracts on Indian land. The tribe says IGRA and its compact with the state give it exclusivity for Class III gambling on their land. But the prediction markets, as they have in other cases, argue that they are not party to the compact, and that event contracts are derivatives, regulated exclusively by the Commodity Futures Trading Commission, so the compact does not apply.
The arguments are the same as in other cases between prediction markets and states or tribes. Last fall in California, a district court judge denied a temporary restraining order to keep Kalshi from operating on Indian land. At that time Judge Jacqueline Scott Corley wrote “The Court does not take lightly Plaintiffs’ concerns about the effects Kalshi’s activities might have on tribal sovereignty and the Tribes’ finances. Indeed, by self-certifying the legality of its event contracts in a 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.”
Blue Lake Rancheria, Chicken Ranch Rancheria of Me-Wuk Indians, and the Picayune Rancheria of the Chukchansi Indians brought the lawsuit, which they are now appealing in the Ninth Circuit. The initial Ho-Chunk complaint was similar to the one filed by the three California tribes.
In Wisconsin, Kalshi lawyers wrote in the latest brief that “the Plaintiff repeats the same argument that the Blue Lake Rancheria court rejected.” Kalshi leans into the argument that the Unlawful Internet Gaming Enforcement Act (UIGEA) and the state of Wisconsin have carveouts for contracts offered on DCMs. It also continues to argue that the Commodities Exchange Act (CEA) preempts IGRA.
Which federal law takes precedence?
The interplay between the three federal laws is being examined in lawsuits across the country. The first to be passed was the CEA in 1974, followed by IGRA in 1988, and UIGEA in 2006. Another federal law that comes into play is the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in 2010. That law was designed to put additional guardrails around the financial system following the 2008 financial crisis, which was highlighted by the collapse of investment bank Bear Stearns.
Kalshi argues that the laws are clear — IGRA pertains only to betting that is actually offered on Indian Land; UIGEA governs internet gambling, but carves out contracts on DCMs; and the CEA through the Commodity Futures Trading Commission (CFTC) oversees derivatives trading. Ultimately, Kalshi argues, IGRA did not contemplate online gambling because it did not exist in 1988, but Congress did address it in UIGEA, writing that “‘bets or wagers’ shall be deemed to occur where they are ‘initiated’ — except with respect to transactions conducted on DCMs such as Kalshi.”
The use of the words “deemed” and “initiated” are key to tribes, in particular Florida’s Seminole tribe has a compact that includes what stakeholders call “magic language,” allowing for bets to be “deemed placed where received” rather than where initiated. This language gives the tribe complete exclusivity for Class III gaming in the state, something that tribes elsewhere, including in California, Minnesota, and Wisconsin seek.
Additional arguments
Among other arguments, Kalshi lawyers revisit the ideas of whether or not prediction markets are “true derivatives,” writing that that is a “legal question, not a factual one” and further that the tribe’s interpretation that the contracts are not “true derivatives because they allegedly lack any ‘hedging or economic purpose’ is incorrect under federal law.”
Kalshi also pushes back on the tribe’s accusations about racketeering, writing that the Ho-Chunks do not properly frame their Racketeer Influenced and Corrupt Organizations Act (RICO) argument. In the brief, Kalshi lawyers write that the tribe cannot show direct injury to their businesses because they do not currently offer sports betting.
“Plaintiff cites no factual allegations supporting it’s claimed injury other than those concerning its ‘exclusive market’ and ‘legal monopoly.’ … That is not the kind of ‘concrete’ or ‘clear and definite injury’ that courts require.”
Finally, Kalshi’s lawyers write that the Ho-Chunks — and other tribes — have little ground to stand on when arguing that prediction markets cause harm to their businesses because the tribe does not currently offer digital sports betting or derivative trading. The Ho-Chunks, and the California tribes, argue that the availability of prediction markets siphons business from their retail casinos by “divert[ing] potential customers.”
Finally, Kalshi argues that the tribe does not make a valid argument in relation to the Lanham Act, which bans false advertising or advertising that would confuse a consumer. At issue throughout the country is the idea that Kalshi and other prediction markets do advertise their sports event contracts as legal betting or sports betting, while the tribe argues that its contracts are not legal. But Kalshi’s lawyers say that Lanham Act “‘prohibits only misrepresentations of fact,’ and not opinions” and goes on to describe Kalshi advertising as opinion.
