California Tribes Win Appeal Against Kalshi Over Prediction Markets

In a significant judicial shift, the US Court of Appeals for the Ninth Circuit has issued a ruling that could redefine the power dynamics between digital betting platforms and indigenous tribes in California. The judges voted 3-0 in favor of the Blue Lake Rancheria Indians and the Chicken Ranch Rancheria of the Me-Wuk Indians. The legal dispute centers on the offering of so-called event contracts by Kalshi and Robinhood, which the tribes argue violate their exclusive gambling rights on tribal lands. The plaintiffs contend that they must retain full sovereignty to regulate any form of betting on their land, a position they claim is undermined by the broad availability of the Kalshi app throughout the state.

The proceedings have already seen a fluctuating history. Originally, three tribes were part of the plaintiff group, but the Picayune Rancheria of the Chukchansi Indians opted out of the race last August. The appeals court's decision stands in sharp contrast to a previous federal district court opinion. That court had denied a motion for a preliminary injunction, stating that Kalshi operated as a federally regulated entity under the Commodity Exchange Act (CEA) and offered derivatives that would not fall under gambling laws. However, the appellate instance now sees this fundamentally differently and remanded the case for further review.

Numbers and facts

The court ruling highlights that the tribes' argument of being protected under the Indian Gaming Regulatory Act (IGRA) is valid. Judge Margaret McKeown clarified in her opinion that the lower court erred by classifying the contracts merely as derivatives. According to McKeown, Kalshi's sports-event contracts are instead an act of placing a bet or wager.

“Reversing the district court’s denial of a preliminary injunction in part, the panel held that the tribes were likely to succeed in their claims that Kalshi’s sports-event contracts on tribal lands violated IGRA and the tribes’ gaming ordinances.” - Margaret McKeown, Judge at the US Court of Appeals for the Ninth Circuit

So far, however, Kalshi has not been explicitly ordered to cease operations in California immediately. This means that further legal steps are necessary if regulators or the tribes wish to enforce an immediate stop. The significance of the case extends far beyond California, as gaming attorney Daniel Wallach described the ruling as a blueprint for similar challenges in other states. Kalshi is currently facing numerous proceedings, including in New Jersey, Nevada, and Maryland, while 34 state attorneys general support efforts to regulate the platform.

Background

The point of contention is the nature of the products. Kalshi claims to be regulated by the Commodity Futures Trading Commission (CFTC) and thus offers legal financial products. The tribes, on the other hand, see this as an attempt to bypass the state gambling monopoly. In California, tribes hold exclusivity for Class III gaming. The Unlawful Internet Gambling Enforcement Act (UIGEA) plays a central role here, as it determines which internet transactions are considered illegal gambling. The appeals court has now classified Kalshi's activity as wagering, bringing the platform into direct conflict with the IGRA.

Also interesting is Kalshi's expansion through partnerships. Recently, daily fantasy sports operator PrizePicks announced it would offer prediction markets in 38 states through a cooperation with Kalshi. PrizePicks was recently sold to the international gaming giant Allwyn in a $1.6 billion deal. This shows that despite legal hurdles, there is massive economic pressure to establish these markets, further fueling the resistance of traditional license holders like the tribes.

Why it matters for German players

For German players, the situation in the USA is an important lesson in the importance of clear regulation. In Germany, the legal situation is clearly defined by the State Treaty on Gambling 2021 (GlüStV 2021). Anyone wishing to offer bets or casino games in this country requires a license from the Gemeinsame Glücksspielbehörde der Länder (GGL). Prediction markets, such as those offered by Kalshi, would have to undergo strict testing in Germany to determine whether they count as sports bets or financial bets. Since financial bets are strictly limited for private customers in Germany and sports bets fall under the 1-euro limit per spin for slots or strict deposit limits of 1,000 euros per month, such a model would hardly be conceivable here without massive restrictions.

Furthermore, the central LUGAS blocking system in Germany ensures that players cannot be active at multiple providers simultaneously and that the monthly limit is monitored across providers. While in the USA there is currently a dispute over whether an app is illegal on tribal land, the German GGL whitelist provides players with the security that their provider operates legally and is controlled. German users should therefore always check whether a provider is listed in the official whitelist to avoid legal gray areas like those currently existing in California.

What it means for GGL-licensed casinos

Casinos with a GGL license benefit from the legal certainty that such US proceedings often lack. While platforms like Kalshi or Robinhood try to bypass regulatory hurdles by being classified as derivative providers, German licensees must adhere to clear player protection requirements. The case in California shows, however, that even digitally operating companies cannot simply ignore local sovereignty rights and laws. For GGL-licensed providers, this means a confirmation of their legal path, as they are protected from such long and costly court battles through compliance with strict German rules, which can sustainably damage customer trust.