The Ninth Circuit has granted a significant appellate victory to Tribal gaming interests just a day after the Senate failed to move forward with the CLARITY Act. This development marks a pivotal moment in the ongoing dispute surrounding prediction markets, which remains unresolved at the Commodity Futures Trading Commission (CFTC).
This week, Tribal gaming advocates achieved favorable results on two fronts: in Congress and in federal court regarding sports prediction markets.
On Tuesday, the Senate did not advance the Digital Asset Market Clarity Act (CLARITY Act), a decision that Tribal organizations had been advocating for, seeking explicit protections under the Indian Gaming Regulatory Act (IGRA), Tribal-state gaming compacts, and Tribal gaming authority.
The following day, the Ninth Circuit ruled that two California Tribes are likely to prevail in their assertion that Kalshi’s sports event contracts infringe upon IGRA when offered on Tribal lands.
These developments highlight the complexities of the broader debate concerning the interaction between federally regulated sports contracts and existing gaming laws, as well as Tribal authority. However, neither of these rulings provides a definitive resolution to the ongoing conflict. The California case will return to the district court, while other Tribal lawsuits and the overarching dispute regarding the CFTC's authority continue to unfold.
The Ninth Circuit's decision affirmed that Blue Lake Rancheria and Chicken Ranch Rancheria are likely to succeed in their IGRA claims against Kalshi, overturning a previous district court ruling on crucial legal issues.
Central to this decision is how the court categorized Kalshi’s sports contracts. The panel stated, “The analysis is functional. IGRA does not concern itself with whether the operator labels the product as a bet, an event contract, or something else; it focuses on the nature of the activity.”
The court determined that Kalshi’s sports event contracts are considered Class III gaming and are deemed “located on Indian lands” when users engage with the contracts from Tribal territory.
Additionally, the court dismissed Kalshi’s argument that the exclusive jurisdiction clause of the Commodity Exchange Act and the Unlawful Internet Gambling Enforcement Act (UIGEA) regarding certain CFTC-regulated transactions undermined the Tribes’ IGRA claims. The panel concluded that neither statute obstructed the Tribes from pursuing their IGRA arguments.
This ruling builds upon an earlier Ninth Circuit decision from August 28, which was issued by a different panel in a Nevada case against Kalshi. That panel also rejected Kalshi’s reliance on UIGEA’s exemptions for certain CFTC-regulated transactions, noting that the law explicitly states that its definitions do not “alter” or “limit” other federal or state laws. Thus, other statutes could interpret wagers based on their conventional meanings rather than UIGEA’s narrower definitions.
In less than three weeks, the Blue Lake panel reiterated this reasoning within the Tribal context, concluding that UIGEA does not supersede IGRA.
The Blue Lake case is now set to return to the district court, where the Ninth Circuit has instructed the judge to consider the remaining factors for the preliminary injunction.
The Ninth Circuit's victory for Tribal interests coincided with another favorable outcome in Washington, where the Senate's cloture vote on the CLARITY Act failed with a count of 49-50, falling short of the 60 votes required to advance the legislation.
The Indian Gaming Association (IGA) expressed its approval of this outcome. Chairman David Z. Bean remarked, “Today, Indian Country’s voice was heard. This is a significant victory for Tribal sovereignty, but it is not the conclusion of this struggle.”
Tribal organizations had contended that the CLARITY Act could potentially expand CFTC authority without adequately safeguarding IGRA and Tribal-state gaming compacts.