9th Cir: Kalshi Event Contracts Are Illegal Gaming Under IGRA
A Ninth Circuit panel found that prediction market operator Kalshi’s sports-related event contracts constitute illegal Class III gaming when accessed from tribal lands, deepening a circuit split on the regulation of such products.
The U.S. Court of Appeals for the Ninth Circuit reversed a district court's denial of a preliminary injunction, holding that the plaintiff tribes are likely to succeed on their claim that Kalshi's event contracts are Class III gaming under the Indian Gaming Regulatory Act (IGRA). The panel rejected Kalshi's characterization of its products as financial swaps, employing a functional analysis that found them to be the “stuff of sports betting” and noting their operational similarity to traditional sportsbooks. This decision creates significant legal risk for the burgeoning prediction market industry, particularly for platforms accessible from tribal lands where tribes often hold exclusive gaming rights. The court also rejected arguments that the Commodity Exchange Act (CEA) preempts other federal laws like IGRA, adding to a growing circuit split on how to regulate these novel products. With divergent rulings from multiple circuits, market participants should watch for a likely grant of certiorari by the U.S. Supreme Court to resolve the widespread legal uncertainty.