Indian Gaming and Prediction Markets: Bet on Litigation

That disagreement has spawned quite a few lawsuits involving states, industrial gaming operators (similar to Las Vegas casinos and on-line sportsbooks) and, most just lately, Indian Tribes.

Courts are being requested to resolve who might supply sports-related prediction merchandise and who can regulate them.

How Are Prediction Markets Like Gaming?
At its most simple stage, gaming entails risking one thing of worth on an unsure end result for the chance to win a prize. On Tribal lands, gaming is ruled by the Indian Gaming Regulatory Act (IGRA), which teams gaming into three classes: Class I, Class II and Class III. The first two classes embody conventional Tribal video games, social video games, bingo and sure player-against-player video games. Nearly the whole lot else—together with on line casino video games, slot machines and sports activities betting—falls inside Class III gaming, which is topic to essentially the most complete regulation and requires a Tribal-state compact (a negotiated settlement between a tribe and the state) earlier than it might be supplied on Tribal lands. Under IGRA and federal felony regulation, Tribes have the unique proper to supply and regulate gaming on Tribal lands, and anybody who presents gaming actions on Tribal lands in violation of the Tribe’s gaming compact may be topic to federal felony penalties. 25 U.S.C. § 2710, 18 U.S.C. § 1166.

By distinction, firms similar to Kalshi and Robinhood describe their merchandise as “prediction markets,” which permit customers to purchase and promote contracts based mostly on the result of future occasions. In the sports activities context, a person might buy a contract predicting whether or not a selected staff will win a sport. If the prediction is appropriate, the contract pays a hard and fast quantity; if incorrect, the contract expires with out worth.

Prediction market operators contend their contracts are monetary merchandise regulated below federal commodities regulation relatively than gaming merchandise topic to state or Tribal gaming legal guidelines. Critics disagree, claiming that though the merchandise are labeled otherwise, they operate like conventional sports activities betting as a result of customers danger cash on the result of a sporting occasion for the chance to obtain a monetary payout.

The similarities elevate questions on competitors. Because sports activities occasion contracts and conventional sports activities wagers share lots of the identical options, critics argue that buyers might view the merchandise as interchangeable. If so, prediction markets may compete instantly with licensed sportsbooks and Tribal gaming operations, whereas working below a special (and fewer demanding) regulatory framework.

Whether these similarities are sufficient to categorise sports activities occasion contracts as gaming is essentially the most elementary query now earlier than the courts.

Why Is There So Much Litigation?
The speedy enlargement of prediction markets has generated litigation for 3 main causes: competitors, regulation and authorized uncertainty.

First, prediction markets have the potential to compete instantly with current gaming operations. If customers view sports activities occasion contracts as substitutes for conventional sports activities betting, licensed sportsbooks and Tribal gaming enterprises might lose clients to prediction market platforms.

Second, states and Tribes have important financial and regulatory pursuits in gaming. Many states obtain tax income and different financial advantages from licensed gaming operations. These pursuits assist clarify why the states of Illinois, Rhode Island and Washington are litigating towards Kalshi. Tribes have negotiated gaming compacts below IGRA and invested closely in gaming infrastructure in reliance on these agreements. If sports activities occasion contracts are finally regulated below federal commodities regulation relatively than gaming legal guidelines, states and Tribes contend that they may lose regulatory authority over merchandise they view as functionally just like sports activities wagering. Beyond the monetary implications, that shift would have an effect on who’s accountable for licensing, oversight, shopper protections and enforcement.

Finally, the authorized standing of sports activities occasion contracts stays unsettled. Courts are being requested to find out whether or not these contracts represent gaming within the first place, whether or not internet-based participation can happen on Tribal lands, and whether or not the Commodity Exchange Act preempts state or Tribal regulation of those merchandise. Those unresolved questions have fueled a rising wave of litigation.

Overview of the Current Litigation
Litigation comes from all instructions. States, non-Tribal casinos and sportsbooks, and Indian Tribes have filed fits towards prediction market operators, whereas prediction market firms have sued to forestall states from implementing gaming legal guidelines towards them.

States contend that sports activities occasion contracts represent sports activities betting and due to this fact must be regulated below state gaming legal guidelines. Prediction market operators disagree, arguing that they function federally regulated exchanges overseen by the Commodity Futures Trading Commission (CFTC), and their merchandise must be ruled by federal commodities regulation relatively than state gaming rules.

Non-Tribal gaming companies have filed amicus briefs supporting the Tribes’ litigation towards Kalshi, claiming that sports activities occasion contracts compete instantly with licensed sportsbooks. They contend that permitting prediction market operators to supply sports activities occasion contracts below federal commodities regulation creates an uneven aggressive panorama as a result of industrial gaming operators stay topic to intensive state licensing, taxation and shopper safety necessities.

Tribes have superior a associated, however distinct, principle. As mentioned beneath, relatively than deal with state regulatory authority, Tribes argue that prediction markets threaten the regulatory framework established below IGRA, intrude with Tribal gaming compacts, and illegally compete with Tribal gaming enterprises which have operated below that framework for many years.

How Is Tribal Litigation Different?
For many Tribes, gaming serves as a vital supply of governmental income and financial growth. Under IGRA, Tribes have negotiated gaming compacts, that are agreements between Tribes and state governments that set up the phrases below which Class III gaming could also be carried out on Tribal lands. In change for the chance to supply sure types of gaming, Tribes tackle sure regulatory obligations and make investments closely in gaming infrastructure.

From the Tribes’ perspective, prediction market operators are providing merchandise that compete in the identical market with out complying with the regulatory necessities that Tribes have adopted for many years. As a outcome, Tribes argue that prediction markets undermine each the financial worth of their gaming operations and the regulatory framework established by way of IGRA and Tribal-state compacts.

Two Key Questions within the Tribal Litigation
Although completely different Tribes have asserted completely different authorized claims, all of them pose two elementary questions. First, are sports activities occasion contracts gaming? Second, if sports activities contracts are gaming, are these contracts being improperly supplied on Tribal lands when accessible by way of the web?

Are Sports Event Contracts Gaming?
Blue Lake Rancheria v. Kalshi has emerged because the main appellate case addressing these points. In that case, a number of California Tribes allege that Kalshi’s sports activities occasion contracts represent illegal Class III gaming that interferes with Tribal gaming rights below IGRA. In addition to asserting claims below IGRA, the criticism alleges violations of the Lanham Act and the Racketeer Influenced and Corrupt Organizations Act (RICO), reflecting the Tribes’ broader problem to Kalshi’s characterization of its merchandise and enterprise mannequin.

At the outset of the case, the Tribes sought a preliminary injunction within the Northern District of California to forestall Kalshi and Robinhood from providing sports activities occasion contracts on Tribal lands. The district court docket denied that request after concluding that the Tribes had not demonstrated a probability of success on the deserves of their claims. As to the IGRA declare, the court docket concluded that Kalshi’s internet-based occasion contracts are ruled by the Commodity Exchange Act and the Unlawful Internet Gambling Enforcement Act, relatively than IGRA, and that questions regarding whether or not the contracts adjust to the Commodity Exchange Act fall throughout the CFTC’s unique jurisdiction. The Tribes appealed that ruling to the Ninth Circuit.

On July 12, 2026, the Ninth Circuit heard argument on the Tribes’ enchantment. The court docket questioned whether or not Kalshi’s sports event contracts are meaningfully completely different from conventional sports activities betting, with one choose remarking that the contracts “sound like a bet.” The panel additionally questioned whether or not Congress meant the Commodity Exchange Act to present the CFTC unique authority over sports activities occasion contracts, and whether or not Tribal gaming legal guidelines may proceed to use when these contracts are supplied to customers positioned on Tribal lands. Although the Ninth Circuit has not issued its choice, the Blue Lake enchantment and the pending district court docket litigation mentioned beneath recommend that the interplay between federal commodities regulation and Tribal gaming regulation will proceed to develop by way of the courts.

No appellate court docket has but determined whether or not sports activities occasion contracts supplied by prediction markets represent gaming below IGRA.

In Ho-Chunk Nation v. Kalshi Inc., Ho-Chunk alleges that Kalshi’s sports activities occasion contracts are functionally indistinguishable from sports activities betting and due to this fact represent illegal Class III gaming when supplied to people positioned on Tribal lands with out Tribal authorization. This argument is just like the acquainted “duck test”: If it appears to be like like a duck, swims like a duck, and quacks like a duck, then it in all probability is a duck. Indeed, Ho-Chunk Nation has argued that since sports activities occasion contracts look and performance like sports activities betting, and compete with Tribal betting choices, courts ought to deal with them as sports activities betting whatever the label. (In this regard, Ho-Chunk Nation was in all probability inspired to listen to the Ninth Circuit choose within the Blue Lake Rancheria case comment that occasion contracts “sound like” betting.)

Prediction market operators reject the Tribes’ characterization. They preserve that sports activities occasion contracts are federally regulated monetary merchandise, supplied by way of exchanges overseen by the CFTC, not gaming merchandise topic to state or Tribal gaming legal guidelines and rules.

Are Digital Sports Contracts Considered to Be on Tribal Land?
Even if sports activities occasion contracts represent gaming, the place does that gaming happen?

Prediction markets function on-line and may be accessed from nearly wherever utilizing a smartphone. As a outcome, courts should decide whether or not the legally related location is the place the change operates, the place its servers are positioned or the place the person enters into the transaction.

The pending Tribal instances all advance an identical principle on this query. The Tribes argue that the related truth will not be the place Kalshi’s servers or company headquarters are positioned, however relatively that people bodily positioned on Tribal lands can entry the platform by way of smartphones and enter into sports activities occasion contracts. In Mescalero Apache Tribe v. Kalshi, for instance, the Tribes argue that IGRA will not be restricted to conventional brick-and-mortar gaming services, and that Congress meant the statute to accommodate evolving applied sciences and fashionable strategies of gaming.

Existing precedent gives some steering, however no definitive reply. In West Flagler Associates v. Haaland, the D.C. Circuit acknowledged that IGRA regulates gaming on Tribal lands and doesn’t independently authorize gaming elsewhere, however that it was permissible for the U.S. Department of the Interior to approve a gaming compact between Florida and the Seminole Tribe of Florida below which on-line bets can be deemed to happen on the location the place the wager was obtained (i.e., the servers for the Tribally owned sportsbook, positioned on Tribal land). Although that case concerned cellular sports activities betting relatively than prediction markets, the placement evaluation may show consequential for prediction market platforms. Following the West Flagler choice, federal regulations subsequently affirmed that Tribal gaming compacts can, if in any other case in line with state and federal regulation, handle statewide distant or web wagering, opening the door for states and Tribes to succeed in agreements about what it means for a web based guess to be “located” on Tribal lands. If that evaluation have been to carry for prediction markets, the reply to the place the occasion contract is positioned may range state-by-state, since every state may have its personal distinctive compacts with native Tribes. Some Tribes may additionally expertise pressure between their efforts to determine their very own distant wagering operations (just like the Seminole Tribe of Florida has finished), and efforts to bar prediction markets from providing entry to customers on Tribal lands—if, below IGRA and the related compact, a wager is deemed to be positioned within the location of the web servers of the platform, Tribes with on-site gaming servers may supply distant wagering to customers positioned outdoors of Tribal land, however might need a tough time concurrently arguing that prediction markets are providing gaming merchandise on Tribal land in instances the place the prediction market’s personal servers are positioned elsewhere.

Looking Ahead
As prediction market platforms proceed to broaden into sports activities occasion contracts, and as rising numbers of individuals start becoming a member of these platforms, extra litigation is certain to observe. In instances involving Tribes, the courts should resolve two elementary questions: whether or not sports activities occasion contracts represent gaming, and whether or not internet-based participation by customers positioned on Tribal lands constitutes gaming on Tribal lands.

Court rulings in these Tribal lawsuits will doubtless form—for a few years to return—the way forward for prediction markets, the scope of Tribal gaming authority, and the connection between federal commodities regulation and gaming regulation.

The authors want to thank summer season regulation clerks Ashwin Bhat and Gabrielle Ladun for his or her contributions to this alert.