Tribal Tensions Between Federal and State Gaming Law

Since 2024, prediction markets have attracted – and continue to attract – much of the media spotlight. Throughout various courtrooms across the country, legal questions involving the Constitution, including federal preemption through the Supremacy Clause and state regulatory authority derived from the Tenth Amendment, are being fervently debated. At the core of the debate: are event contracts subject to state gaming regulation or are they financial products regulated by the Commodity Futures Trading Commission (“CFTC”)?[1].Whatever the answer turns out to be, regulatory uncertainty over prediction markets impacts US tribes as we explore in this piece

Background and Arguments

As everyone in the gaming world knows by now, Kalshi is a prediction market platform where users can create sports event contracts (“SE Contracts”) in advance of a real-world sporting event. The Commodity Exchange Act (“CEA”), which governs regulated derivatives exchanges (“DE”), created the CFTC as the sole regulatory authority with “exclusive jurisdiction” over DE across the United States.[2]

Prediction market providers contend their offerings are financial instruments with prices set by buyers and sellers of the instruments, rather than sports wagering, and are traded on open markets rather than betting platforms.[3] Throughout the multiple lawsuits on this issue, Kalshi has argued that federal preemption shields prediction markets from state regulation.[4]

Conversely, state regulators assert that each state’s regulations and laws apply to regulated (and illegal) gambling therein, and that the CFTC cannot (and was not intended to) regulate gambling or supersede the states’ authority to regulate gambling.[5] The regulators contend Kalshi’s SE Contracts are sports wagers that must comply with state-by-state sports betting laws and regulations.[6]

Further, regulators and Native American tribes alike claim prediction markets are in violation of Tribal-State Gaming Compact provisions that guarantee tribes exclusive sports betting opportunities within tribal reservation lands.[7]

How regulatory uncertainty over prediction markets impacts US tribes

Tribes have expressed concern with the scope of SE Contracts, asserting these offerings cause various harms and should be subject to state-by-state regulation rather than CFTC regulation.[8]

Specifically, tribes have argued that the offering of SE Contracts on tribal lands violates the Federal Indian Gaming Regulatory Act (“IGRA”), along with state and tribal laws.[9] IGRA grants tribes the exclusive right to regulate and conduct gaming on their lands, including sports betting (pursuant to a tribal-state gaming compact).[10] SE Contracts have been characterized by tribes as unlawful on tribal lands under IGRA and detrimental to tribal interests.[11] Tribes view these SE Contracts as a diversion of revenues from tribal casinos that frustrates IGRA’s purpose of providing for tribal self-sufficiency.[12]

In addition to IGRA, tribes have suggested additional federal legal violations plague these SE Contracts, including the Interstate Wire Act, the Illegal Gambling Business Act, and the Unlawful Internet Gambling Enforcement Act.[13]

Setting aside federal legal interpretation issues, tribes have expressed significant apprehension over the impact of SE Contracts on their communities, as well as the states in which their tribal lands are located. Tribes claim SE Contracts subject tribal communities to unregulated gambling without the benefit of adequate consumer protection.[14] That 18-year-olds are able to participate in gambling through SE Contracts using mobile apps like Kalshi’s on tribal lands has led to great concern by tribes.[15] Tribes maintain that such conduct is gambling, which requires appropriate identity verification and age screening to shield vulnerable individuals and those below the state minimum gambling age.[16]

Additionally, tribes characterize marketing materials claiming SE Contracts are a legal method of nationwide sports betting as fraudulent advertising.[17] Furthermore, tribes point out that Kalshi’s SE Contracts lack the licensing, monitoring, anti-corruption controls, and problem-gambling safeguards required under state and tribal gaming laws.[18] Tribes assert that IGRA and Tribal-State Compacts, in addition to regulatory safeguards, contain requirements which have the effect of decreasing the risks of match-fixing, market manipulation, and harms to vulnerable populations, while Kalshi’s SE Contracts are not protected by such safeguards.[19]

Tribal Advocacy

California and Wisconsin-based tribes are among those seeking a judicial remedy.[20] Court filings by tribes include requests for declaratory judgment that Kalshi’s SE Contracts constitute unlawful sports betting on tribal lands and injunctions preventing any further offerings and attendant marketing.[21] These lawsuits also seek corrective advertising and compliance measures to prevent access to prediction market platforms on tribal lands.[22]

In parallel, tribal organizations, such as the Arizona Indian Gaming Association, have provided written comments to the CFTC expressing similar concerns.[23] Chair James Siva of the California Nations Indian Gaming Association voiced concern over prediction market apps, citing them as “much more concern[ing] for tribes, at the moment” than daily fantasy sports betting apps.[24]

Case Updates

Initially, Kalshi succeeded in obtaining preliminary injunctions in Nevada and New Jersey but failed to obtain an injunction in Maryland.[25] More recently, the same Nevada court denied another prediction market platform provider an injunction that would have allowed it to continue operations during the ongoing litigation, reigniting arguments on both sides over the Nevada injunction.[26] The Nevada court’s more recent interpretation of the definition of “swap”—one type of derivative contract—fell in favor of the state of Nevada. In response, Kalshi has urged interested parties to challenge the CFTC’s interpretation under the CEA using the Administrative Procedure Act rather than directly litigate with Kalshi.[27]

Kalshi’s and trading platform rivals Robinhood’s response briefs in the Blue Lake Rancheria et al v. Kalshi Inc. et al lawsuit assert that the CEA overrides IGRA, and that tribes are “attempt[ing] to regulate trading on an exchange operated from thousands of miles away.”[28] They further assert that, if tribes prevail, prediction market operators may be required to geofence tribal lands out of their markets in California, which some speculate would lead to “a domino effect” of tribes nationwide making similar requests.[29]

On November 10, 2025, the United States District Court for the Northern District of California denied the tribes’ motion seeking a preliminary injunction against Kalshi on the grounds that they failed to show a likelihood of success for alleged violations of the IGRA and the Lanham Act. In so ruling, the Court determined that it did not have jurisdiction over the IGRA claim, opining that IGRA only governs internet gaming by the tribes but no other party (such as Kalshi), and that instead the Unlawful Internet Gambling Enforcement Act (“UIGEA”) instead was applicable to Kalshi’s operations. As for the Lanham Act claim, the Court found that the Kalshi advertisements merely stated an opinion that its product is legal, and failed to support a showing of competitive injury.

The lawsuit is far from over, as the Court is set to hear argument on Kalshi’s pending motion to dismiss in March of 2026. Further, the tribes may have grounds to seek an appeal of the injunction denial from the Ninth Circuit Court of Appeals. In the meantime, Kalshi may continue to operate trades on prediction markets in California.

While the District Court Judge may have ruled in Kalshi’s favor, she left room for disagreement, by observing:

“As a final note, the Court does not take lightly Plaintiffs’ concerns about the effects of Kalshi’s activities might have on tribal sovereignty and the Tribes’ finances. Indeed, by self-certifying the legality of its event contracts in a way that insulates its activities from judicial review, Kalshi may have found a way around prohibitions on interstate gambling that were created with the Tribes’ best interest in mind.”

There appears to be further momentum building across the country behind tribal opposition to prediction market platforms. The Southern Ute Indian Tribe and the Ute Mountain Ute Tribe filed a complaint against the state of Colorado seeking to obtain a ruling supporting their ability to conduct statewide digital sports betting akin to Florida’s “Seminole Model” (bets are deemed placed where received).[30] However, the complaint was dismissed based upon the court’s opinion that the language differences between the Florida and Colorado compacts signified each state’s consent to different sports betting models.[31] The Colorado tribes may not be willing to accept Kalshi’s operation throughout Colorado, when the court has ruled that tribes cannot so operate. This may be a particular sticking point for tribes, given the similarities between Kalshi’s argument that SE Contracts in California are made “thousands of miles away” and the unsuccessful Colorado tribal argument that sports bets are placed where received. At the time this article was written, the Colorado tribes had not yet determined whether to appeal the court ruling.

Analysis

The patchwork of interrelated court cases across the nation may well end up at the United States Supreme Court. In the interim, various questions have arisen that have an equal potential to shape the tribal gaming landscape in the United States.

Those questions include:

• Is a SE Contract a swap or gambling?
• Does IGRA take precedence over the CEA?
• How will the CFTC interpret the location of the placement of swaps? Will this matter?
• Can IGRA and the CEA be read together such that prediction markets may offer SE Contracts nationwide so long as they geofence out all tribal lands?
• If a wager’s placement largely depends on tribal-state gaming compact language, will various tribes seek to revise their compacts?
• If Kalshi and other prediction market platforms are permitted to continue forward, will tribes choose to seek out commercial partners to compete with similar products?
• If tribes do explore the commercial route, how will the regulatory regime operate as between the tribes and states?
• Will Congress enter the fray with new or additional legislation to clarify its intent?

In any event, legal gaming expertise and jurisprudence will need to continue to rapidly evolve to account for the regulatory and statutory gaps created by technological innovation.

Heidi McNeil Staudenmaier is Senior Partner at Snell and Wilmer LLP in Phoenix Arizona, USA. Her other articles for IMGL can be found here

[1] Special thanks to Caitlin Vanderkarr, a former associate at Snell & Wilmer, who assisted with preparing this article.

[2] Caitlin Vanderkarr & Eric L. Kintner, Event Contracts Versus Sportsbooks: Charting the Legal Divide in U.S. Gambling Law, Snell & Wilmer (Apr.  30, 2025); Heidi McNeil Staudenmaier & Caitlin Vanderkarr, Prediction Markets on Trial: Kalshi, Robinhood, and the Legal Crossroads of Sports Betting, Snell & Wilmer (2025); see also Daniel O’Boyle, Kalshi-NJ Judge: Congress Defines CFTC Swaps Broadly — It’s Not Our Job To Fix It, InGame (Sept. 11, 2025),https://www.ingame.com/kalshi-third-circuit-judge-oral-arguments/

[3] Charlotte Capewell, California’s Tribal Gaming Leaders Target Prediction-Market Apps, Complete iGaming (Oct. 21, 2025), https://completeigaming.com/californias-tribal-gaming-leaders-target-prediction-market-apps/.

[4] Vanderkarr & Kintner, supra note 1; Staudenmaier & Vanderkarr, supra note 1; see also O’Boyle, supra note 1.

[5] Id.

[6] Id.

[7] Id.

[8] Staudenmaier & Vanderkarr, supra note 1; see also Sydney Price, Calif. Tribes Seek Ban On Kalshi’s Alleged Sports Gambling, Law360 (Sept. 5,2025, 7:07 PM EDT), https://www.law360.com/articles/2384822/calif-tribes-seek-ban-on-kalshi-s-alleged-sports-gambling

[9] Id.

[10] Id.

[11] Id.

[12] Id.

[13]Vanderkarr & Kintner, supra note 1; see also Illegal Gambling Business Act, Fiveable,https://library.fiveable.me/key-terms/criminal-law/illegal-gambling-business-act (last visited April 24, 2025); Unlawful Internet Gambling Enforcement Act, Fed. Trade Comm’n, https://www.ftc.gov/legal-library/browse/statutes/unlawful-internet-gambling-enforcement-act(last visited Apr. 24, 2025); Steve Ruddock, Unlawful Internet Gambling Enforcement Act, Betting USA (Dec. 8, 2024), https://www.bettingusa.com/laws/uigea/;  David Hoppe, The Impact of PASPA’s Repeal on Sports Betting, GAMMA LAW (Jan. 1, 2021), https://gammalaw.com/the-impact-of-paspas-repeal-on-sports-betting/; S. 555, 100th Cong. (1987).

[14] Id.

[15] Id.

[16] Id.

[17] Id.

[18] Id.

[19] Id.

[20] Staudenmaier & Vanderkarr, supra note 1; see also Price, supra note 7.

[21] Id.; see also Blue Lake Rancheria et al. v. Kalshi Inc. et al., No. 1:25-cv-06162 (N.D. Cal. filed July 22, 2025), https://www.pacermonitor.com/public/case/59135061/Blue_Lake_Rancheria_et_al_v_KALSHI_INC_et_al. At the time this article was written, the District Court of Northern California issued a decision on November 10,, 2025, denying the tribes’ request for injunction and determining that the tribes were not likely to prevail on the merits. As such, it is unclear at this point whether and how the lawsuit will proceed.

[22] Staudenmaier & Vanderkarr, supra note 1; see also Price, supra note 7.

[23]Vanderkarr & Kintner, supra note 1; see also U.S. Commodity Futures Trading Comm’n (https://www.cftc.gov/PressRoom/Events/CommentsPredictionMarketsRoundtable) (last visited Apr. 21, 2025); Brady Dale, Axios Crypto Newsletter, Axios (Apr. 17, 2025), https://www.axios.com/newsletters/axios-crypto-adae5270-1ade-11f0-8d2b-e1710080eba6.html?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axioscryptocurrency&stream=business; U.S. Commodity Futures Trading Comm’n, Comments: Prediction Markets Roundtable, https://www.cftc.gov/PressRoom/Events/CommentsPredictionMarketsRoundtable (last visited Apr. 21, 2025).

[24] Ashley Zavala, Robinhood, Kalshi Face Pushback From California Gaming Tribes Over Sports Wagers, KCRA (Oct. 19, 2025), https://www.kcra.com/article/robinhood-kalshi-california-gaming-tribes-sports-california-politics-360/69042671

[25] Staudenmaier & Vanderkarr, supra note 1; see also Pacifico Agnellini, Greg Brower & William Downey, Third Time’s The Charm for Gambling Regulators in Kalshi Litigation, BHFS Insights (Aug. 11, 2025),https://www.bhfs.com/insight/third-times-the-charm-for-gambling-regulators-in-kalshi-litigation/.

[26] Daniel O’Boyle, Sports Contracts Access Shut Off in Nevada, as Kalshi Aims to Avoid Same Fate, InGame (Nov. 3, 2025), https://www.ingame.com/crypto-com-shuts-off-sports-nevada/.

[27] Id.

[28] Id.

[29] Id.

[30] Jill R. Dorson, EndGame: NCAA To Delay Allowing Prop Betting, No Seminole Model Here, More, InGame (Oct. 31, 2025), https://www.ingame.com/endgame-ncaa-reverse-tribal-gaming-rozier/.

[31] Id.