Kalshi has suffered another setback in the Ninth Circuit Court of Appeals.
A three-judge panel on Wednesday reversed part of a Northern District of California ruling that had denied two tribes’ request for a preliminary injunction against Kalshi and Robinhood.
The court held that Blue Lake Rancheria and Chicken Ranch Rancheria of Me-Wuk Indians are likely to succeed in arguing that Kalshi’s sports event contracts constitute unauthorized Class III gaming when users enter the trades from their tribal lands.
The Ninth Circuit did not itself order Kalshi to stop offering the contracts. Instead, it sent the case back to U.S. District Judge Jacqueline Scott Corley to decide the remaining preliminary injunction factors, including irreparable harm, the balance of equities, and the public interest.
But the appellate court has now resolved the most important element in the tribes’ favor: they are likely to win on the underlying Indian Gaming Regulatory Act claim.
Sports bets by another name
Kalshi describes its products as federally regulated event contracts traded on a Commodity Futures Trading Commission-designated derivatives exchange. The tribes argued that a person paying money on a team, spread, total, player prop or parlay is functionally placing a sports bet, and that doing so on tribal land without tribal authorization violates IGRA.
The Ninth Circuit agreed with the tribes’ characterization.
The court said the contracts are likely Class III gaming because they require a customer to put money at risk on the uncertain outcome of a sporting event in exchange for a potential payout. It noted that Kalshi offers point spreads, over-under totals, player propositions and multi-leg “combos,” which the court described as parlays.
Its hypothetical was particularly direct: A person standing at the Blue Lake Casino Hotel could put $100 on the San Francisco Giants through Kalshi or use DraftKings to wager $100 on the same game.
“The only thing that changes is Kalshi’s vocabulary,” the court wrote. “Kalshi may reshuffle the cards, but it cannot change the hand.”
The tribal-land hook
The lower court had concluded that Kalshi’s transactions did not occur on tribal lands because the company and its technology infrastructure are located elsewhere.
The Ninth Circuit rejected that logic.
For purposes of IGRA, the relevant gaming activity occurs at least in part where the customer places the trade. If a user is physically on one of the tribes’ rancherias when purchasing a sports contract, the contract is “located on Indian lands” even if Kalshi operates from New York and its back-end technology sits off reservation.
That matters because the tribes’ federally prescribed gaming procedures and tribal ordinances create a closed system. IGRA allows Class III gaming on their lands only with tribal authorization and conducted through its regulatory structure.
Kalshi is not authorized under those systems.
The court also rejected Kalshi’s argument that the tribes could not enforce their gaming procedures against a company that was not a party to their compact. The tribes are not seeking ordinary contract remedies, the panel said. They are seeking to enjoin unlawful Class III gaming activity on their own lands, a remedy IGRA permits.
Another Ninth Circuit loss
The decision builds directly on the Ninth Circuit’s August 28 ruling in KalshiEX v. Assad, the Nevada case.
In that case, the Ninth Circuit found Kalshi’s sports event contracts were likely not swaps under the Commodity Exchange Act and allowed Nevada to enforce its gaming laws. The panel said the “substance” of the contracts was sports gambling, regardless of Kalshi’s derivatives terminology.
Wednesday’s tribal gaming decision adopts that same functional approach. The court cited Assad repeatedly and held that sports contracts are likely Class III gaming under IGRA when entered from tribal lands.
The court also went further than the Nevada decision in one important respect. It said Kalshi would lose its IGRA argument even if its products qualified as swaps. The court held that the CEA’s “exclusive jurisdiction” provision does not erase a separate federal statute such as IGRA.
That makes this ruling harder for Kalshi to cabin. The company cannot simply win by persuading another court that an event contract qualifies as a swap. In the Ninth Circuit’s view, even swap status would not automatically exempt activity on tribal land from IGRA.
The Third Circuit split
The Ninth Circuit’s growing anti-Kalshi line of cases sits in direct tension with the Third Circuit’s decision in KalshiEX v. Flaherty, involving New Jersey.
The Third Circuit held at the preliminary injunction stage that Kalshi’s sports contracts could qualify as swaps under federal commodities law and that the Commodity Exchange Act likely preempted New Jersey from applying its gambling regulations to the platform. That ruling gave Kalshi a shield from state enforcement in New Jersey while the case continues.
That’s in direct split from the Ninth Circuit decision on prediction markets.
New Jersey has already asked the U.S. Supreme Court to review the Third Circuit’s decision, arguing that the federal appeals courts need a national answer on whether CFTC-regulated exchanges can offer sports contracts outside state gaming systems.
That request has only grown more important. The Ninth Circuit now has two opinions rejecting the idea that calling a sports wager an event contract ends the regulatory inquiry.
