Ninth Circuit Grapples with Kalshi's Sports Betting Comparisons in Tribal Appeal

The U.S. Court of Appeals for the Ninth Circuit has intensely questioned prediction market operator Kalshi in a recent legal proceeding. Judges repeatedly compared Kalshi's sports-event contracts to traditional sports wagers. The central question is whether these contracts should be treated differently from conventional betting under U.S. federal law. The case was initiated by three California Indian tribes: the Blue Lake Rancheria, the Chicken Ranch Rancheria of Me-Wuk Indians, and the Picayune Rancheria of the Chukchansi Indians. They seek to revive a previously denied request for a preliminary injunction.

The tribes argue that Kalshi's sports-event contracts constitute unauthorized Class III gaming on tribal lands. This, they claim, violates the Indian Gaming Regulatory Act (IGRA) and threatens tribal sovereignty. The conflict revolves around where the line is drawn between a financial product and a sports bet, especially when these offerings are accessible on tribal land. The implications could be far-reaching, not just for Kalshi, but for the entire prediction market industry in the U.S.

Numbers and facts

Native American tribes in the U.S. generated over $43 billion in gaming revenue in fiscal year 2023. These revenues are fundamental to funding tribal governments and support social services such as public safety, healthcare, housing, and education. James Siva, Chairman of the California Nations Indian Gaming Association, stated in an interview after the hearing that preliminary studies suggest prediction markets have already reduced tribal gaming revenue by approximately 5 percent. He views prediction markets as the largest and most immediate threat to tribal gaming and sovereignty they have seen since the industry's inception. He also anticipates that the legal dispute will ultimately reach the U.S. Supreme Court.

Background

A significant portion of the hearing focused on whether Kalshi's contracts are meaningfully different from sportsbook wagers. Judge M. Margaret McKeown asked Kalshi attorney Grant Mainland to consider a scenario: Someone on tribal land buys a Kalshi contract that pays out if the San Francisco Giants win. Simultaneously, the same person places an identical wager through DraftKings. "So, in your view, the first one would be allowed, the Kalshi, but not the DraftKings?" McKeown asked. Mainland responded that "designated contract markets are regulated differently from regulated sportsbooks." Judge Richard Paez questioned whether Kalshi's advertisement claiming "sports betting is legal in all 50 states" would hold up in the context of tribal land and IGRA. Mainland eventually conceded that trading on whether a team wins a game "has some similarity to doing the same thing on DraftKings." Paez remarked, "Like a bet to me."

The tribes argued that even if Kalshi's conduct is legal elsewhere, that framework does not apply on tribal lands. Tribal attorney Lester Marston explained: "Let's just assume that their conduct off the reservation is totally legal. I put to you this: the moment that you take that legal conduct and you engage in that exact same conduct on the reservation, they're committing a crime under 1166, and they're violating the civil provisions of the IGRA." He also cited the Supreme Court's decision in Michigan v. Bay Mills Indian Community, which states that the relevant location is where the patron places the wager, not where the servers or computers processing the transaction are located. "What you do is you look to where the patron is placing the bet," Marston said. "It's where every roll of the dice and spin of the wheel takes place."

Another key point was whether the tribes have the right to sue at all. The tribes claim their gaming ordinances, tribal-state compacts, and IGRA form "one comprehensive regulatory scheme." Kalshi disputes this. "Do the plaintiff tribes have the right to sue? Under IGRA's plain text, the answer is no," Mainland stated. Judge McKeown appeared unconvinced: "But that wouldn't be so unreasonable. I mean, the whole tribal situation is a very complicated relationship."

Why it matters for German players

German players benefit from a much clearer legal framework than the one the Ninth Circuit is currently deliberating. The German State Treaty on Gaming 2021 (GlüStV 2021) has comprehensively regulated online gambling in Germany. This means legal online casinos must possess a German license from the Joint Gaming Authority of the Federal States (GGL). Player protection is paramount here. Players can find these providers on the so-called GGL whitelist. All casinos listed there adhere to strict rules, including a betting limit of 1 euro per spin on slot machines and a monthly deposit limit of 1,000 euros, which is monitored by the central LUGAS system. This system ensures that players cannot circumvent these limits even across multiple providers. Unlike the ambiguous "prediction markets" in the USA, whose legal classification is still disputed, German players know exactly what to expect from GGL-licensed providers. The date July 13, 2026, holds no current relevance for German regulation. Players should always ensure they only play with providers holding a German license to guarantee legal certainty and high player protection. Offers without a GGL license, such as those from providers with MGA or Curacao licenses, are illegal in Germany and do not offer the same level of protection.

What it means for GGL-licensed casinos

For GGL-licensed online casinos, this development in the U.S. has no direct impact. The German gambling market is regulated independently. The distinction between financial products and gambling is traditionally clearer in Germany. Prediction markets, such as those offered by Kalshi, usually fall under the Securities Trading Act or similar financial market regulations in Germany. They are not classified as gambling within the meaning of the GlüStV 2021. GGL casinos must continue to focus on compliance with German regulations. This includes strict control of betting and deposit limits, connection to LUGAS, and adherence to all player protection measures. However, the Kalshi case illustrates how complex the distinction of wagers can be in jurisdictions that do not have such a clear separation as Germany.

"The rise of the prediction market is, without a doubt, the largest and most impending threat we have to tribal gaming and to tribal government and tribal sovereignty that we have currently. It may be the biggest threat we’ve seen since the beginning of this industry.“ - James Siva, Chairman of the California Nations Indian Gaming Association

The debate in the U.S. underscores the importance of a clear legal framework to protect consumers and prevent unfair competition. In Germany, this framework was established precisely to prevent such gray areas that are now being litigated in the U.S.