Indian Gaming and Prediction Markets: Bet on Litigation

That disagreement has spawned numerous lawsuits involving states, commercial gaming operators (such as Las Vegas casinos and online sportsbooks) and, most recently, Indian Tribes.

Courts are being asked to decide who may offer sports-related prediction products and who can regulate them.

How Are Prediction Markets Like Gaming?
At its most basic level, gaming involves risking something of value on an uncertain outcome for the opportunity to win a prize. On Tribal lands, gaming is governed by the Indian Gaming Regulatory Act (IGRA), which groups gaming into three categories: Class I, Class II and Class III. The first two categories include traditional Tribal games, social games, bingo and certain player-against-player games. Nearly everything else—including casino games, slot machines and sports betting—falls within Class III gaming, which is subject to the most comprehensive regulation and requires a Tribal-state compact (a negotiated agreement between a tribe and the state) before it may be offered on Tribal lands. Under IGRA and federal criminal law, Tribes have the exclusive right to offer and regulate gaming on Tribal lands, and anyone who offers gaming activities on Tribal lands in violation of the Tribe’s gaming compact can be subject to federal criminal penalties. 25 U.S.C. § 2710, 18 U.S.C. § 1166.

By contrast, companies such as Kalshi and Robinhood describe their products as “prediction markets,” which allow users to buy and sell contracts based on the outcome of future events. In the sports context, a user may purchase a contract predicting whether a particular team will win a game. If the prediction is correct, the contract pays a fixed amount; if incorrect, the contract expires without value.

Prediction market operators contend their contracts are financial products regulated under federal commodities law rather than gaming products subject to state or Tribal gaming laws. Critics disagree, claiming that although the products are labeled differently, they function like traditional sports betting because users risk money on the outcome of a sporting event for the opportunity to receive a financial payout.

The similarities raise questions about competition. Because sports event contracts and traditional sports wagers share many of the same features, critics argue that consumers may view the products as interchangeable. If so, prediction markets could compete directly with licensed sportsbooks and Tribal gaming operations, while operating under a different (and less demanding) regulatory framework.

Whether those similarities are enough to classify sports event contracts as gaming is the most fundamental question now before the courts.

Why Is There So Much Litigation?
The rapid expansion of prediction markets has generated litigation for three primary reasons: competition, regulation and legal uncertainty.

First, prediction markets have the potential to compete directly with existing gaming operations. If consumers view sports event contracts as substitutes for traditional sports betting, licensed sportsbooks and Tribal gaming enterprises may lose customers to prediction market platforms.

Second, states and Tribes have significant economic and regulatory interests in gaming. Many states receive tax revenue and other economic benefits from licensed gaming operations. These interests help explain why the states of Illinois, Rhode Island and Washington are litigating against Kalshi. Tribes have negotiated gaming compacts under IGRA and invested heavily in gaming infrastructure in reliance on those agreements. If sports event contracts are ultimately regulated under federal commodities law rather than gaming laws, states and Tribes contend that they could lose regulatory authority over products they view as functionally similar to sports wagering. Beyond the financial implications, that shift would affect who is responsible for licensing, oversight, consumer protections and enforcement.

Finally, the legal status of sports event contracts remains unsettled. Courts are being asked to determine whether these contracts constitute gaming in the first place, whether internet-based participation can occur on Tribal lands, and whether the Commodity Exchange Act preempts state or Tribal regulation of these products. Those unresolved questions have fueled a growing wave of litigation.

Overview of the Current Litigation
Litigation comes from all directions. States, non-Tribal casinos and sportsbooks, and Indian Tribes have filed suits against prediction market operators, while prediction market companies have sued to prevent states from enforcing gaming laws against them.

States contend that sports event contracts constitute sports betting and therefore should be regulated under state gaming laws. Prediction market operators disagree, arguing that they operate federally regulated exchanges overseen by the Commodity Futures Trading Commission (CFTC), and their products should be governed by federal commodities law rather than state gaming regulations.

Non-Tribal gaming businesses have filed amicus briefs supporting the Tribes’ litigation against Kalshi, claiming that sports event contracts compete directly with licensed sportsbooks. They contend that allowing prediction market operators to offer sports event contracts under federal commodities law creates an uneven competitive landscape because commercial gaming operators remain subject to extensive state licensing, taxation and consumer protection requirements.

Tribes have advanced a related, but distinct, theory. As discussed below, rather than focus on state regulatory authority, Tribes argue that prediction markets threaten the regulatory framework established under IGRA, interfere with Tribal gaming compacts, and illegally compete with Tribal gaming enterprises that have operated under that framework for decades.

How Is Tribal Litigation Different?
For many Tribes, gaming serves as a critical source of governmental revenue and economic development. Under IGRA, Tribes have negotiated gaming compacts, which are agreements between Tribes and state governments that establish the terms under which Class III gaming may be conducted on Tribal lands. In exchange for the opportunity to offer certain forms of gaming, Tribes take on certain regulatory obligations and invest heavily in gaming infrastructure.

From the Tribes’ perspective, prediction market operators are offering products that compete in the same marketplace without complying with the regulatory requirements that Tribes have followed for decades. As a result, Tribes argue that prediction markets undermine both the economic value of their gaming operations and the regulatory framework established through IGRA and Tribal-state compacts.

Two Key Questions in the Tribal Litigation
Although different Tribes have asserted different legal claims, they all pose two fundamental questions. First, are sports event contracts gaming? Second, if sports contracts are gaming, are those contracts being improperly offered on Tribal lands when accessible through the internet?

Are Sports Event Contracts Gaming?
Blue Lake Rancheria v. Kalshi has emerged as the leading appellate case addressing these issues. In that case, several California Tribes allege that Kalshi’s sports event contracts constitute unlawful Class III gaming that interferes with Tribal gaming rights under IGRA. In addition to asserting claims under IGRA, the complaint alleges violations of the Lanham Act and the Racketeer Influenced and Corrupt Organizations Act (RICO), reflecting the Tribes’ broader challenge to Kalshi’s characterization of its products and business model.

At the outset of the case, the Tribes sought a preliminary injunction in the Northern District of California to prevent Kalshi and Robinhood from offering sports event contracts on Tribal lands. The district court denied that request after concluding that the Tribes had not demonstrated a likelihood of success on the merits of their claims. As to the IGRA claim, the court concluded that Kalshi’s internet-based event contracts are governed by the Commodity Exchange Act and the Unlawful Internet Gambling Enforcement Act, rather than IGRA, and that questions concerning whether the contracts comply with the Commodity Exchange Act fall within the CFTC’s exclusive jurisdiction. The Tribes appealed that ruling to the Ninth Circuit.

On July 12, 2026, the Ninth Circuit heard argument on the Tribes’ appeal. The court questioned whether Kalshi’s sports event contracts are meaningfully different from traditional sports betting, with one judge remarking that the contracts “sound like a bet.” The panel also questioned whether Congress intended the Commodity Exchange Act to give the CFTC exclusive authority over sports event contracts, and whether Tribal gaming laws could continue to apply when those contracts are offered to users located on Tribal lands. Although the Ninth Circuit has not issued its decision, the Blue Lake appeal and the pending district court litigation discussed below suggest that the interaction between federal commodities regulation and Tribal gaming law will continue to develop through the courts.

No appellate court has yet decided whether sports event contracts offered by prediction markets constitute gaming under IGRA.

In Ho-Chunk Nation v. Kalshi Inc., Ho-Chunk alleges that Kalshi’s sports event contracts are functionally indistinguishable from sports betting and therefore constitute unlawful Class III gaming when offered to individuals located on Tribal lands without Tribal authorization. This argument is similar to the familiar “duck test”: If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck. Indeed, Ho-Chunk Nation has argued that since sports event contracts look and function like sports betting, and compete with Tribal betting offerings, courts should treat them as sports betting regardless of the label. (In this regard, Ho-Chunk Nation was probably encouraged to hear the Ninth Circuit judge in the Blue Lake Rancheria case remark that event contracts “sound like” betting.)

Prediction market operators reject the Tribes’ characterization. They maintain that sports event contracts are federally regulated financial products, offered through exchanges overseen by the CFTC, not gaming products subject to state or Tribal gaming laws and regulations.

Are Digital Sports Contracts Considered to Be on Tribal Land?
Even if sports event contracts constitute gaming, where does that gaming occur?

Prediction markets operate online and can be accessed from virtually anywhere using a smartphone. As a result, courts must determine whether the legally relevant location is where the exchange operates, where its servers are located or where the user enters into the transaction.

The pending Tribal cases all advance a similar theory on this question. The Tribes argue that the relevant fact is not where Kalshi’s servers or corporate headquarters are located, but rather that individuals physically located on Tribal lands can access the platform through smartphones and enter into sports event contracts. In Mescalero Apache Tribe v. Kalshi, for example, the Tribes argue that IGRA is not limited to traditional brick-and-mortar gaming facilities, and that Congress intended the statute to accommodate evolving technologies and modern methods of gaming.

Existing precedent provides some guidance, but no definitive answer. In West Flagler Associates v. Haaland, the D.C. Circuit recognized that IGRA regulates gaming on Tribal lands and does not independently authorize gaming elsewhere, but 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 under which online bets would be deemed to occur at the location where the wager was received (i.e., the servers for the Tribally owned sportsbook, located on Tribal land). Although that case involved mobile sports betting rather than prediction markets, the location analysis could prove consequential for prediction market platforms. Following the West Flagler decision, federal regulations subsequently affirmed that Tribal gaming compacts can, if otherwise consistent with state and federal law, address statewide remote or internet wagering, opening the door for states and Tribes to reach agreements about what it means for an online bet to be “located” on Tribal lands. If that analysis were to hold for prediction markets, the answer to where the event contract is located could vary state-by-state, since each state will have its own unique compacts with local Tribes. Some Tribes may also experience tension between their efforts to establish their own remote wagering operations (like the Seminole Tribe of Florida has done), and efforts to bar prediction markets from offering access to users on Tribal lands—if, under IGRA and the relevant compact, a wager is deemed to be placed in the location of the internet servers of the platform, Tribes with on-site gaming servers could offer remote wagering to users located outside of Tribal land, but might have a difficult time simultaneously arguing that prediction markets are offering gaming products on Tribal land in cases where the prediction market’s own servers are located elsewhere.

Looking Ahead
As prediction market platforms continue to expand into sports event contracts, and as growing numbers of people begin joining those platforms, more litigation is sure to follow. In cases involving Tribes, the courts must decide two fundamental questions: whether sports event contracts constitute gaming, and whether internet-based participation by users located on Tribal lands constitutes gaming on Tribal lands.

Court rulings in these Tribal lawsuits will likely shape—for many years to come—the future of prediction markets, the scope of Tribal gaming authority, and the relationship between federal commodities regulation and gaming law.

The authors wish to thank summer law clerks Ashwin Bhat and Gabrielle Ladun for their contributions to this alert.