Kalshi was dealt a huge blow in its effort to provide nationwide access to prediction markets on Wednesday.
A federal appeals court ruled that the operators lacked the authority to operate on the lands of two California native tribes. The 9th U.S. Circuit Court of Appeals in San Francisco ruled 3-0 to overturn a district court’s decision and grant a preliminary injunction requested by the tribes, thereby preventing Kalshi from offering its prediction markets.
Kalshi loses native ground battle
The party opposite Kalshi was the Blue Lake Rancheria Tribe and Chicken Ranch Rancheria of Me-Wuk Indians. The native groups had been denied a preliminary injunction, thereby allowing Kalshi to continue offering contract trading on native grounds, by the district court.
The decision was reached after the appeals court found that sports event contracts represented a form of Class III gaming under the Indian Gaming Regulatory Act (IGRA) and were not protected by the Unlawful Internet Gambling Enforcement Act of 2006.
Sports betting and gaming lawyer Daniel Wallach shared the court’s decision in a post on X just after noon on Wednesday.
The lawsuit compared side-by-side examples of sports betting odds from
FanDuel and prediction markets from Kalshi, both regarding an NFL matchup between the Dallas Cowboys and New York Jets. Kalshi’s depiction included the use of American-style betting odds, which the Commodity Futures Trading Commission (CFTC) recently reminded licensed platforms that they were not allowed to use.
It also included a post from Kalshi’s Instagram, which showed an article titled “Sports Betting Legal in all 50 States on Kalshi.” That’s significant, since sports betting is legal in less than 40 states, and prediction markets routinely argue that they do not offer sports betting services when they are subjected to regulatory scrutiny.
“In our view, the challenged sports event contracts constitute ‘class III gaming activities,’” the decision read. “And we recently clarified ‘the substance of sports event contracts offered on Kalshi’s [designated contract market] is sports gambling, regardless of whether Kalshi calls them swaps.’”
Are Kalshi prediction markets sports betting?
Prediction markets exist for events and industries outside of sports. Politics, entertainment, pop culture, tech, weather, finance, and other avenues of daily life have been gamified into contract-style purchasing, where users trade outcomes and profit or lose based on the accuracy of their predictions.
With all of those industries available on platforms such as Kalshi (and many others), the court still found that “up to 90 percent of Kalshi’s trading volume comes from sports.” Analytics platform DeFi Rate also found that NFL trading was just shy of $1 billion during the first week of the 2026 season, supporting the court’s claim.
“The similarities between a sports event contract, which even Kalshi calls ‘sports betting,’ and a traditional sports wager are overwhelming,” the court said in its decision.
It is important to note that a preliminary injunction was granted because the tribes could likely show that Kalshi’s contracts violated the IGRA and the tribes’ gaming laws. That does not mean that the court flatly ruled that they did and thereby made Kalshi’s sports event contracts illegal.
Kalshi is within its right to appeal the decision. However, this is the second time that it has lost 3-0 in the Ninth Circuit Court, leaving the chances of a rehearing slim.
The Trade Handle Prediction Markets Take
Add this to the recent series of decisions that have gone against Kalshi. While the company is not in any imminent danger of losing its federal support from the CFTC, it is piling up court losses in various states, and now, tribal areas. Kalshi and other prediction platforms maintain that their sports event contracts, which involve peer-to-peer trading, are distinctly different from betting against house-made odds.