Ninth Circuit rules in tribal gaming interests' favour in prediction market dispute

Two California Tribes, Blue Lake Rancheria and Chicken Ranch Rancheria, persuaded the Ninth Circuit that their IGRA claim against Kalshi is likely to prevail, and the appellate court reversed the district court on the central legal questions. That outcome arrived one day after the Senate declined to move the Digital Asset Market Clarity Act (CLARITY Act) forward. The dispute now goes back before the district court in the Blue Lake matter, while the larger question of the Commodity Futures Trading Commission's (CFTC) authority remains open.

Rather than accept Kalshi's own description of its sports products, the panel examined how the activity actually operates. In the court's words, “IGRA does not ask whether the operator labels the product a bet or an event contract, or something else. It asks what the activity looks like.” On that basis the judges determined that the contracts amount to Class III gaming and count as “located on Indian lands” whenever a user enters them from Tribal territory. Kalshi had contended that the Tribes' IGRA theory was displaced both by the Commodity Exchange Act's exclusive-jurisdiction provision and by how the Unlawful Internet Gambling Enforcement Act (UIGEA) treats certain CFTC-regulated transactions; the panel turned down that contention, holding that neither statute blocked the Tribes' theory.

An earlier Ninth Circuit ruling, handed down on 28 August by a separate three-judge panel hearing Nevada's case against Kalshi, provides the foundation. In a footnote, that panel declined to accept Kalshi's reliance on UIGEA's carveout for certain CFTC-regulated transactions, observing that the statute expressly says its definitions do not “alter” or “limit” other federal or state laws. Writing less than three weeks afterward, the Blue Lake panel applied the same logic to the Tribal setting and held that UIGEA does not displace IGRA.

When the Senate voted on cloture for the CLARITY Act, the tally was 49-50, leaving the bill below the 60 votes required to proceed. Tribal organizations had warned that the measure might broaden CFTC authority while failing to expressly safeguard IGRA, Tribal-state gaming compacts and Tribal and state gaming authority, and they had pushed for wording that would stop federally regulated prediction markets from offering sports- and casino-style contracts. Such worries had already been aired in public at a Senate Indian Affairs Committee roundtable on 4 August. Beyond gaming, the Senate's final disagreement involved unresolved ethics and divestment provisions tied to federal officials' digital-asset holdings, and other financial-sector concerns also remained unresolved.

Indian Gaming Association (IGA) Chairman David Z. Bean said: "Today, Indian Country’s voice was heard." He added: "This is an important victory for Tribal sovereignty, but it is not the end of this fight."

The CFTC is still the front where nothing has been settled. Leaders from 17 Tribal organizations sat down with CFTC Chairman Michael S. Selig one day ahead of the Senate vote; the National Congress of American Indians (NCAI) and the IGA said they welcomed the meeting yet considered it short of the formal government-to-government consultation they had requested. NCAI President Mark Macarro said: "So make no mistake, nothing in the legislative history of the CEA suggests that Congress ever intended the CFTC to become a backdoor regulator of gaming." Oklahoma Indian Gaming Association Chairman Matthew Morgan said the CFTC's conduct was undermining IGRA, letting illegal Class III gaming encroach on Tribal sovereignty and eroding revenue streams that Tribal government programmes and services depend on.

The agency has kept insisting that event contracts fall under federal authority. After a Michigan court order in July touched trades Kalshi had already executed, the CFTC halted an emergency rule change and directed the exchange to complete the open trades, pointing to the Commodity Exchange Act's demand for a uniform national derivatives market and impartial access. When New York sued Kalshi in August, the agency relied on comparable authority. None of this settled whether sports event contracts breach IGRA or state gaming laws, and the agency has said nothing publicly to suggest that either the Senate vote or the Blue Lake decision altered its stance.