Native American Tribes File Lawsuit Against Kalshi Over Illegitimate Sports Betting on Reservation Land
In a recent legal development, three Native American tribes from California have filed lawsuits against Kalshi, a federally regulated prediction market, and Robinhood, which distributes Kalshi’s markets. The tribes allege that Kalshi's sports event contracts amount to illegal sports gambling on tribal lands, in violation of the Indian Gaming Regulatory Act (IGRA).
Kalshi's Prediction Market Platform Under Legal Scrutiny
Kalshi operates as a federally regulated prediction market under the Commodity Futures Trading Commission (CFTC) as a Designated Contract Market (DCM), allowing it to offer yes/no event contracts nationwide, including sports event contracts. However, the tribes argue that this constitutes Class III gaming without the necessary tribal-state compacts required under IGRA, undermining tribal sovereignty to regulate gambling on their reservations.
Alleged Violations and Counterarguments
The tribes also allege violations of the Federal Wire Act and have brought claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), accusing Kalshi and Robinhood of operating an unlawful gambling enterprise using “wire fraud” to profit from unregulated wagers. Kalshi disputes these accusations, asserting that these contracts are novel commodities contracts regulated by the CFTC, not illegal gambling.
Ongoing Regulatory Uncertainty
States like Nevada and New Jersey have also issued cease-and-desist orders against Kalshi, contending that its offerings constitute unauthorized gambling under state law. This regulatory uncertainty and debate persist, with key questions about jurisdiction, tribal sovereignty, and the classification of prediction markets under gaming laws unresolved.
The Indian Gaming Regulatory Act (IGRA) and Its Implications
IGRA, signed into law by President Ronald Reagan in 1988, established a system for reservations to launch, oversee, and retain revenue from gaming on their lands. The tribes accuse Kalshi and Robinhood of not complying with these requirements and not being "federally recognized Indian tribes conducting class III gaming activity pursuant" to IGRA.
Racketeering Accusations
The complaint also accuses Kalshi of engaging in racketeering by conspiring to offer gaming products that reveal "consciously disregarding or actively circumventing" important "regulatory concerns." For Class III gaming to be conducted on Indian lands, several procedural steps are required, including the promulgation of a tribal ordinance that is approved by the chairman of the National Indian Gaming Commission.
The Nature of Kalshi's Contracts
Kalshi offers sports-based event contracts, such as asking users who will be the pro baseball champion, with various choices and different prices for "yes" and "no" outcomes. The company also offers other types of event contracts, such as "Who will President Trump pardon this year."
Undermining Sovereignty and Violating Gaming Ordinances
The tribes stress that Kalshi and other companies are expected to comply with these ordinances. They argue that Kalshi is violating IGRA, Tribes Gaming Ordinances, the Racketeer Influenced and Corrupt Organizations Act (RICO), and other laws. The central accusation is that Kalshi is offering unauthorized sports betting on the respective reservations of the suing tribes, thereby undermining their sovereignty and violating their gaming ordinances.
As the legal battle unfolds, the status of Kalshi’s prediction markets under IGRA and RICO remains uncertain, with the company maintaining that it operates as a federally regulated commodity futures market, not illegal gambling. The case underscores the complexities and ongoing debates surrounding the regulation of prediction markets, particularly in relation to gambling laws and tribal sovereignty.
- People are questioning the legality of Kalshi's sports event contracts, as three Native American tribes from California have filed lawsuits, alleging they amount to illegal sports gambling on tribal lands, violating the Indian Gaming Regulatory Act (IGRA).
- In this ongoing legal dispute, Kalshi's prediction market platform, operated as a Designated Contract Market (DCM) under the Commodity Futures Trading Commission (CFTC), is under scrutiny for its sports event contracts, including sports betting and other event contracts.
- As the legal battle progresses, there is regulatory uncertainty surrounding Kalshi's operations, with states like Nevada and New Jersey issuing cease-and-desist orders, contending that its offerings constitute unauthorized gambling under state law.
- The legal complaint against Kalshi also brings racketeering accusations, alleging the company is engaging in racketeering by conspiring to offer unregulated gambling products in violation of IGRA, RICO, and tribal gaming ordinances.
- The tribes accuse Kalshi of undermining their sovereignty by offering unauthorized sports betting on their reservations, violating relevant laws, and failing to comply with necessary regulatory requirements, such as the approval of a tribal ordinance by the chairman of the National Indian Gaming Commission.
