Not a day goes by without prediction markets facing legal challenges. A group of New Mexico tribes has filed the latest lawsuit against Kalshi.
At the same time, Minnesota lawmakers approved a bill that explicitly bans a range of prediction markets, including any on sports and elections.
The Mescalero Apache Tribe, Pueblo of Isleta, Pueblo of Pojoaque, and Pueblo of Sandia brought the action against Kalshi, alleging that the company is violating Indian gaming compacts by offering illegal gaming activities.
Kalshi Offers Illegal Sports Betting, Claim Tribes
Kalshi has argued that its platform is distinct from sports betting, in part because it does not act as the house and does not accept wagers directly. The tribes rejected this argument.
“Whether an activity constitutes ‘gaming’ under IGRA does not depend on whether players bet against the ‘house’ or against each other,” states the lawsuit.
It also quotes a Kalshi lawyer who previously stated, “Contracts that involve games are probably not the type of contracts that we want to be listed on an exchange, because they don’t have any real economic value to them.”
It adds, “Kalshi’s sports betting event contracts have all the hallmarks and characteristics that sports bettors expect in sports gambling: straight bets (which team will win), over/unders (based on total points scored by both teams), point spreads (will a team win by a certain number of points), proposition bets (will a specific outcome occur within the game, such as a player scoring a certain number of points), and parlays (groups of proposition bet outcomes occurring together).”
As a result, the tribes argue that sports prediction markets should be treated as sports betting. Under New Mexico law, sports bets are only allowed to be legally placed in person at tribal casinos.
Mixed Fortunes for Other Tribal Lawsuits
It is the third legal case brought by tribal groups against Kalshi, following actions in California and Wisconsin last year.
In Wisconsin, this week, a judge rejected Kalshi’s motion to dismiss the lawsuit brought by the Ho Chunk Nation, which has been supported by tribal groups throughout the country.
In California, the Ninth Circuit rejected the tribes’ request to align their appeal with a Nevada-related prediction market case.
The Blue Lake Rancheria, Chicken Ranch Rancheria of Me-Wuk Indians, and Picayune Rancheria of the Chukchansi Indians had asked the Ninth Circuit to assign their appeal against Kalshi and Robinhood to the same panel handling the case in Nevada.
Nevada has been the most successful in fighting prediction markets, and is the only state thus far to force Kalshi to withdraw.
“Due to significant differences between this appeal and North American Derivatives Exchange, Inc. v. State of Nevada … the motion to reassign this appeal to the panel that heard argument in that appeal … is DENIED,” stated a court order.
Minnesota Passes Ban on Sports Prediction Markets
Meanwhile, Minnesota lawmakers passed legislation to explicitly ban sports prediction markets. The House voted 100-32 in favor of SF4760, which had already been approved in a 57-9 vote in the Senate.
The legislation is a wide-ranging Public Safety policy bill. The text related to prediction markets would prohibit operators from offering contracts on the following:
- Sports & Games: Athletic events, individual player stats, and any games involving cards, dice, or electronic devices.
- Crises & Disasters: Wars, national emergencies, natural disasters, mass shootings, terrorism, and public health crises.
- Human Events: Any specific occurrence happening to an individual or a group of people.
- Government & Politics: Elections and the actions or conduct of government agencies, officials, and employees.
- Legal Proceedings: Civil or criminal lawsuits, jury trials, settlements, and convictions.
- Violence & Mortality: Deaths, assassinations, attempted killings, or any mass casualty events.
- Weather: Short-term weather conditions and environmental events.
- Pop Culture: Award ceremonies and entertainment release dates.
- Statements: Predictions on whether a person will make a specific statement.
It will now be up to Governor Tim Walz to sign off on the bill. If passed, it would empower state authorities to issue cease-and-desist orders against companies that violate the bill’s terms. Kalshi is therefore likely to receive this order and would more than likely respond by suing the state.
The company continues to argue that state laws are irrelevant and its actions are governed by the Commodity Futures Trading Commission (CFTC). The CFTC has vowed to defend licensed operators and has joined legal actions in several states.
The debate on the legality of sports prediction markets continues to rumble on. In an interview this week, lawyer Melinda Roth supported the CFTC as the appropriate regulator of sports-event contracts, but admitted it will ultimately be up to the Supreme Court to decide whether the markets are lawful.
That is not likely to happen until at least 2027. In the meantime, expect a lot more lawsuits and efforts from lawmakers to rein in what many see as illegal sports betting.
