A new U.S. Supreme Court (SCOTUS) decision gives further weight to an amicus brief filed in the Kalshi vs. New Jersey case now before the Third Circuit, according to a letter to the court from the Tribal Amici July 1. The Tribal Amicus — a coalition of 65-plus tribes and tribal entities across the U.S. — says that the June 27 SCOTUS decision in Federal Communications Commission v. Consumers’ Research strengthens the arguments that the Commodity Futures Trading Commission (CFTC) does not have the right allow Kalshi to self-certify event contracts.
Kalshi, the prediction-market platform that began offering sports betting contracts in January, is suing the state of New Jersey after it sent a cease-and-desist letter instructing the company to exit the state. At issue is that Kalshi is regulated by a federal agency, the CFTC, and is not beholden to state or tribal regulation or taxation for digital sports betting. Kalshi is also in court with regulators from Maryland and Nevada, and the Tribal Amici filed its brief in the Maryland case as well.
Kalshi has been in existence since 2018, but it wasn’t until it got approval last fall to offer contracts on the 2024 U.S. presidential election that its existence raised concern for the gambling industry. In January, the company dipped its toe into a form of sports betting by offering Super Bowl contracts. Kalshi openly refers to itself as a “betting” platform, though its contracts do not work the same way traditional sports betting does. It is not beholden to the same sorts of guardrails, licensing process, or tax structure as state-regulated sportsbooks.
Sovereignty in question
For Indian Country, Kalshi’s rise presents a unique situation — under the Indian Gaming Regulatory Act, tribes are granted exclusivity to gaming on their lands. This means that in states like Florida or Oklahoma or California, in-person casino-style gambling is only available on tribal land. It should also mean that the only digital betting allowed on a reservation would be via a tribal platform. But as a federally licensed platform, Kalshi is currently available on sovereign tribal land. But it is not licensed or approved by any tribal government in the U.S. The tribes want to ban Kalshi from offering its product in their sovereign territories.
In an unprecedented action June 17, more than 60 tribal entities came together to sign an amicus brief submitted to the Third Circuit that read, in part, Kalshi’s presence will “have a significant impact on their or their member tribes’ rights regarding gaming on Indian lands, as well as Indian gaming and tribal governmental revenue as a whole.”
A day later, 34 state attorneys general filed a joint amicus brief arguing, in part, for state sovereignty. In total, five amicus briefs in support of the state of New Jersey’s position were filed within two days. Among the issues is also that the CFTC was created to manage commodity futures contracts. Another question now is how sporting events fit into the definition of “commodity” or the framework of what the CFTC regulates.
The Tribal Amici seeks to add to its brief, writing that the “CFTC does not have the requisite control or final decision-making authority over Kalshi’s self-certifications.”
How SCOTUS case applies
While the SCOTUS case is not related to gambling or Kalshi, there is one particular argument that the tribes point to that supports their own claim. The case is about providing “universal service,” or access to all Americans to communications services. In the decision, SCOTUS details how the FCC is required to vet companies and products they might offer. In essence, the FCC, a government agency, must do its homework before allowing companies it oversees to self-certify.
The CFTC has historically allowed the companies it oversees to self-certify contracts. CFTC Acting Chair Caroline Pham said during a conference call with tribal leaders that in its 50 years of existence, the agency had never disallowed a contract proposal. She also said it would not begin to do so now.
“Unlike the FCC’s role described in Consumers’ Research, the CFTC makes no findings prior to self-certifications, there is no mandatory agency oversight of self-certifications, and there are no
standards by which the CFTC implements any decision-making authority over self-certifications,” wrote the Tribal Amici.
The Third Circuit is currently considering which amicus briefs to accept. The next potential date for action will be the week of Sept. 8, the next available date the court will sit. According to the docket, “counsel is expected to be available if argument is scheduled” that week.
