California Tribes Sue Kalshi and Robinhood Over Alleged Illegal Sports Gambling

Three California tribes have filed a lawsuit against prediction market platform Kalshi and Robinhood, which features Kalshi’s markets on its platform, alleging the companies are operating illegal sports betting on tribal lands, violating the Indian Gaming Regulatory Act (IGRA) and threatening tribal sovereignty.

The plaintiffs, the Blue Lake Rancheria, Chicken Ranch Rancheria of Me-Wuk Indians, and Picayune Rancheria of Chukchansi Indians, have filed a 71-page complaint in the U.S. District Court for the Northern District of California seeking a preliminary and permanent injunction against the defendants.

The lawsuit, first brought to light by attorney Daniel Wallach on X, brings a new challenge for Kalshi. While it faces several lawsuits under state laws, the prediction market platform is now being challenged under IGRA.

Alleged Violations of IGRA

The tribes allege Kalshi and its partner Robinhood violate the IGRA by offering sports betting on tribal lands:

“Kalshi is engaging in sport gambling as defined by the IGRA and the Tribes’ Compacts, Procedures, and Ordinances. Therefore, the Tribes seek an order from the Court enjoining Kalshi from conducting its illegal sports gambling operation.”

The lawsuit emphasizes that IGRA governs all Class III gaming on Indian lands. It requires authorization through a federally approved compact between the tribes and the state. Under California’s law, sports betting falls under Class III gaming. Under existing compacts, the state doesn’t allow tribes to offer sports betting.

“No Indian tribe in California, including the Plaintiff Tribes, offer sports betting on their Indian lands, and betting on the outcome of sporting events would constitute a violation of the Tribes’ Compacts and Procedures.”

As with other lawsuits filed against Kalshi, the tribes argue that the platform’s sports event contracts mimic traditional sports betting. By offering them on tribal lands without tribal oversight, Kalshi violates not only IGRA but also tribal sovereignty.

“Kalshi not only violates each of the Tribes’ Procedures, Compacts, Ordinances, and TGC regulations, but it also directly interferes with and impairs the Tribes’ sovereign right to regulate gaming on their Reservations.”

“Kalshi’s offering of the contracts to the general public for play on the Tribes’ Reservations violates the IGRA.”

The plaintiffs also point out that anyone over 18 can pick up a mobile device or a tablet on tribal lands and access Kalshi. That constitutes engagement in unlawful gambling on Indian lands where the legal gambling age is 21.

RICO Allegations and Racketeering Pattern

The plaintiffs also bring claims against Kalshi and Robinhood under the Racketeer Influenced and Corrupt Organizations Act (RICO). They allege the defendants engage in a “pattern of racketeering activity.”

This includes a systematic misrepresentation of unlawful gaming contracts as legitimate commodities traded under the CFTC’s jurisdiction. The complaint specifically cites 18 U.S.C. § 1964(c), stating:

“This is an action initiated by the Tribes for injuries to their business caused by defendants’ violation of the Racketeer Influenced and Corrupt Organizations Act through a pattern of racketeering activity.”

The tribes argue that by offering illegal contracts, Kalshi undermines the regulated gambling market, drawing customers away. That causes economic harm.

“Loss of revenue has a direct impact on tribal governmental functions and has a tangible effect on the services and programs the tribal governments provide to their members and all persons who live, work, and visit the Reservations.”

According to the complaint, by disguising unlicensed sports betting as financial trading, Kalshi intentionally evades tribal, state, and federal regulation. This fits the legal definition of racketeering.

Misleading Marketing and Role of Brian Quintenz

The complaint also provides detailed marketing citations made by Kalshi. Additionally, it includes the involvement of Brian Quintenz, a Kalshi board member and President Trump’s nominee for CFTC chair, as evidence of Kalshi’s alleged evasion of CFTC regulation.

It provides detailed examples of Kalshi’s misleading marketing campaign:

“Kalshi has published advertisements asserting itself as ‘The First Nationwide Legal Sports Betting Platform’ and that its customers can engage in ‘Sports Betting Legal in all 50 States on Kalshi.’”

The plaintiffs argue such statements constitute false and misleading advertising, particularly given the legal ambiguity of the contracts and lack of approval from the CFTC.

Quintenz’s Comments

The complaint also references comments by Quintenz, who served as CFTC chair during Trump’s first term. In a 2021 statement, he wrote:

“The Commission is not a moral arbiter. It is not expert in determining what is in the public’s interest, and it is certainly not equipped to tell the public what its interest should be.”

The tribes argue that this philosophy, along with Quintenz’s claims that the CFTC is not required to enforce restrictions under its Rule 40.11, demonstrates a deliberate strategy to sidestep regulatory scrutiny.

Quintenz has also stated that the commission can choose when to review particular contracts. Even if it declines to regulate contracts at all, it would still “follow the law.”

Furthermore, during his Senate hearing last month, he also signaled openness to expanding prediction markets. He suggested that Congress could ultimately resolve any legal conflicts between federal and state authority.

The tribes see this as a part of a broader pattern:

“Kalshi has been prolific in offering sports event contracts with the knowledge that the legality of their sports event contracts is highly questionable and widely criticized as an impermissible form of sports gaming or gambling, at a time when power in the CFTC is being consolidated in one commissioner, Quintenz, a Kalshi board member.”

Broader Implications of the Lawsuit

The outcome of this lawsuit could have significant consequences for prediction markets and tribal sovereignty. A ruling in favor of the tribes will reaffirm the primacy of IGRA over gaming activities on tribal land.

It would set a national precedent for how platforms like Kalshi must operate in connection with tribal jurisdiction. It would also force the platform to employ geolocation technology. That’s something Kalshi has argued in other lawsuits would be highly costly.

If the court agrees that sports event contracts are illegal Class III gaming, other tribes would likely bring similar legal actions. That could force Kalshi and even Polymarket when it reenters the US to seek formal regulatory clarity on sports event contracts.

The case could be pivotal in determining the boundaries between financial innovation, illegal gambling, and federal and tribal oversight.

As Wallach explains, the case is different than those Kalshi has faced against state regulators. Here, the tribes are on the offense, moving for a preliminary injunction. The suit also allows them to obtain injunctive relief and damages. In contrast, the outcome of the state cases would be a dismissal of the lawsuit.

A decision in the case is unlikely to come for months. Still, it could be the most formidable legal challenge Kalshi has faced yet.