A Northern California District Court judge delivered tribes with gaming interests their first loss in a series of legal battles against event contract firms Kalshi and Crypto.com.
In California, a group of tribes went on the offensive earlier this year and sued Kalshi, claiming it was violating the Indian Gaming Regulatory Act (IGRA) by offering sports-related event contracts on tribal lands, as those contracts were tantamount to Class III gaming.
The lawsuit also suggested that Kalshi’s marketing, which regularly claims that “sports betting is now legal in all 50 states,” violated the Lantham Act and equated to false advertising.
Judge denied both tribal requests for injunctions
In a ruling issued Monday, Judge Jacqueline Corley denied the tribes’ request for a preliminary injunction that would require Kalshi to both geofence tribal lands out of their offerings and prevent them from continuing the ad campaign regarding nationwide sports betting.
On the latter, Corley was quick to dismiss the Lantham Act allegations as thin. She said Kalshi can easily argue it is expressing an opinion with that statement and, since opinions cannot be proven false, they cannot be covered by the act.
As for the IGRA allegations, her ruling was a little more nuanced.
Remember UIGEA?
The heart of Corley’s conclusion is that the Unlawful Internet Gambling Enforcement Act (UIGEA), not IGRA, is what holds weight when considering the sports-related event contracts Kalshi offers. IGRA is the law of the land when it comes to gaming exclusively on tribal lands, but gaming that takes place across tribal lands and other states, as she argued is the case with Kalshi, is the purview of the UIGEA.
“The UIGEA, unlike IGRA, expressly addresses internet gaming that can be accessed in locations where such gaming is unlawful, including Indian lands,” she observed. Corley also noted that the UIGEA has carve-outs for intratribal gaming, but includes illegal internet gambling that takes place on tribal lands that crosses into other states.
She went on to note that the UIGEA also very specifically carved out contracts covered under the Commodity Exchange Act (CEA), meaning that what Kalshi, Crypto.com and others offer under the regulation of the Commodity Futures Trading Commission (CFTC) is not considered illegal gambling under that law.
The tribes argued that these contracts were in violation of the CEA, putting forth the oft-debated language of the Special Rule regarding gambling. Corley deferred to the regulator on the matter and said it was up to the CFTC, not the court, to determine.
Judge has concerns about sports contract Catch-22
That is not to say there is no hope for the tribal cause in the case. The suit continues to move forward and this is only a denial of the preliminary injunction. Corley also ended her ruling on a sympathetic note that indicated she realizes the scope of the issue being litigated.
“As a final note, the Court does not take lightly Plaintiffs’ concerns about the effects 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.
“But, on the record currently before the Court, and in light of the Commodity Exchange Act’s self-certification process, Plaintiffs have not met their burden of showing a likelihood of success on their IGRA claim.”
Tribes take first loss on event contracts
This is the first loss for a tribal entity in the sports contract legal battle. Amicus briefs filed by the tribes previously helped lead to preliminary injunctions against Kalshi in Maryland and Crypto.com in Nevada. A tribal group also recently added itself as an amicus curiae in the Crypto.com lawsuit against the Massachusetts Gaming Commission.
Meanwhile, Kalshi is taking a victory lap, releasing the following statement regarding the ruling:
“We welcome today’s decision denying the plaintiff tribes’ motion for a preliminary injunction. Kalshi’s nationwide, federally-regulated exchange offers all users a fair and transparent way to trade event contracts. Casinos located on tribal lands offer their customers a fundamentally different product.”
