- The Ninth Circuit reversed a lower court’s denial of an injunction, siding with the Blue Lake Rancheria and Chicken Ranch Rancheria tribes against Kalshi.
- The panel held that on tribal land Kalshi’s sports-event contracts amount to Class III gaming, the category the Indian Gaming Regulatory Act governs.
- The court ruled the Commodity Exchange Act’s exclusive-jurisdiction clause would not shield Kalshi from other federal law even as a swap.
- U.S. District Judge Jacqueline Scott Corley gets the case back and must weigh the injunction’s remaining factors.
SAN FRANCISCO – A three-judge panel of the U.S. Court of Appeals for the Ninth Circuit ruled Sept. 16 that Kalshi’s sports-event contracts amount to illegal Class III gaming when offered on tribal land, and held that Kalshi’s central federal-preemption defense would fail even if the Commodity Exchange Act classifies its contracts as swaps.
A Reversal Rooted In Where The Bet Is Placed
Chief Judge Mary H. Murguia and Judges M. Margaret McKeown and Richard A. Paez reversed U.S. District Judge Jacqueline Scott Corley, who had refused a preliminary injunction to Blue Lake Rancheria and Chicken Ranch Rancheria of Me-Wuk Indians, two federally recognized tribes in Humboldt and Tuolumne counties, according to the panel’s opinion, written by McKeown.
Corley had denied the injunction on three grounds. Kalshi’s transactions do not occur on Indian lands, the Unlawful Internet Gambling Enforcement Act controls Kalshi’s conduct, and the UIGEA does not reach the contracts because the Commodity Exchange Act regulates them, she reasoned.
The panel found otherwise on all three points. Class III gaming covers “all forms of gaming” that are not Class I or Class II gaming, the opinion says, giving blackjack, baccarat, slot machines and parimutuel horse-wagering as examples under the statute.
Kalshi’s event contracts, which pay out if a customer’s chosen side wins a sports outcome and expire worthless if it does not, fit that definition, the panel held. The wagering act occurs on Indian lands the moment a bettor enters the contract from tribal territory, regardless of where Kalshi’s own infrastructure sits.
Robinhood Markets and its Robinhood Derivatives unit, also named as defendants, take orders for those same contracts as a registered futures commission merchant, one of the channels the opinion says lets users “located nearly anywhere in the United States” enter into Kalshi’s event contracts.
A Preemption Shield The Panel Called Too Narrow To Reach IGRA
The panel went further than rejecting Kalshi’s argument that the tribes’ claims belong in an administrative challenge to the Commodity Futures Trading Commission (CFTC), not a lawsuit against Kalshi itself. The Ninth Circuit had already ruled Aug. 28, in KalshiEX v. Assad, that Kalshi’s sports contracts are “likely not swaps” at all, which would place them outside the commission’s exclusive jurisdiction from the start.
Blue Lake’s panel added a second, independent finding, ruling it “would be compelled to reverse even if” Kalshi’s contracts were swaps. The Commodity Exchange Act expressly preempts only “State or local law that prohibits or regulates gaming” for contracts traded on a designated exchange, the panel wrote, while leaving other federal statutes untouched.
Because Congress never wrote IGRA out of that carve-out, the commission’s “exclusive jurisdiction” over swap trading does not bar a federal court from hearing the tribes’ IGRA claim, the same way SEC oversight of a market does not exempt a firm from antitrust law.
That reading sets the Ninth Circuit against the Third Circuit, which ruled in April, in KalshiEX v. Flaherty, that the same exclusive-jurisdiction clause does preempt state gambling law, handing Kalshi a win over New Jersey regulators.
The Blue Lake opinion also catalogs a Sixth Circuit panel calling the jurisdictional question “largely in equipoise (if not favoring Ohio)” in a fight with that state’s gaming regulator, a Maryland federal court reading the commission’s jurisdiction as exclusive only of the SEC, and a New York federal court that, like Blue Lake, assumed Kalshi’s contracts are swaps and still found no preemption of state gambling law.
For Kalshi, the split means a future ruling that its contracts are swaps would not by itself revive the broad shield the company has argued for against tribal and other federal claims. The opinion reads the Commodity Exchange Act’s express preemption as reaching state and local gaming law alone, and even that narrower shield is one the Third Circuit granted and the New York court refused.
Kalshi’s contracts have drawn scrutiny beyond this case. The company is among the prediction market apps listing self-certified sports-outcome contracts on a CFTC-designated exchange, and the same preemption argument lost in a Washington state court in July, when a Washington judge blocked Kalshi and rejected the preemption defense.
What Happens Next
With the tribes likely to prevail on the IGRA claim, the panel left three preliminary-injunction factors to Corley, ones the district court never reached the first time, namely whether the tribes face irreparable harm, where the equities tip and whether an injunction serves the public interest.
The panel separately affirmed the dismissal of the tribes’ Lanham Act claim over Kalshi’s advertisement that “Sports Betting [Is] Legal in all 50 States on Kalshi,” ruling that the legality of Kalshi’s contracts remains too unsettled across the same split of courts for the ad to count as a false statement of fact rather than opinion.
Corley must now decide those remaining factors before any injunction barring Kalshi’s contracts on legal sports betting markets in Blue Lake and Chicken Ranch territory can take effect.
