Native American tribes that helped block California sports betting are taking legal action against sports prediction markets.
Three tribes filed a lawsuit Tuesday in the U.S. District Court for the Northern District of California seeking to stop Kalshi and Robinhood from offering prediction markets in the state, arguing the companies are conducting illegal CA sports betting in violation of tribal, state and federal law.
It is the latest in a growing list of legal challenges targeting sports prediction markets, which helped Kalshi hit a $2 billion valuation in June.
CA sports betting lawsuit targets Kalshi, Robinhood
In the 71-page complaint, the Blue Lake Rancheria, Chicken Ranch Rancheria, and Picayune Rancheria argue that Kalshi’s event contracts are “substantively, nothing more than illegal, unregulated wagers on the outcomes of sporting events.”
The plaintiffs allege that violates the Indian Gaming Regulatory Act, the California Constitution, and terms of tribal-state compacts, which prohibit sports wagering without voter approval.
“Kalshi will claim that it is not offering sports gambling,” the lawsuit said. “Kalshi will tell the Court that it is a Designated Contract Market, regulated exclusively by the Commodities Futures Trading Commission (CFTC), and is merely operating a ‘prediction market’ … While masquerading as novel commodities and futures products, these event contracts are, substantively, nothing more than illegal, unregulated wagers.”
The tribes are seeking an injunction to block the markets in California, as well as damages and attorneys’ fees. The lawsuit also argues that Kalshi’s contracts do not qualify as legitimate commodities trading because they involve no hedging, delivery, or economic risk mitigation.
“Robinhood’s event contracts are regulated by the CFTC and offered through Robinhood Derivatives, LLC, a CFTC-registered entity, allowing retail customers to access prediction markets in a safe, compliant, and regulated manner,” a Robinhood spokesperson said in an emailed statement. “So far, two federal courts have made initial rulings that the CFTC’s rules preempt other laws and we intend to defend ourselves against these claims.”
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A spokesperson with Kalshi did not respond to a request for comment.
Kalshi launched its first sports contract in January and has since expanded to offer hundreds of markets on team and season-long outcomes. Robinhood was its first distribution partner, though Kalshi’s CEO recently said he plans to bring more than a dozen others into the fold.
The platform took in over $130 million in volume on this year’s NBA Finals and over $500 million on March Madness. Sports now dominate Kalshi’s marketplace, which previously focused on politics, weather, economic indicators, and novelty events like the Oscars.
Kalshi has defended its sports event contracts as legal derivatives regulated by the CFTC, arguing that the contracts are fundamentally different from sports betting, which is only legal in 38 states. These markets help users hedge risk, inform public opinion, and increase transparency in decision-making, the company has said.
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The CFTC has not publicly addressed the legality of its sports contracts. The agency canceled a planned roundtable on event contracts earlier this year despite mounting pressure from lawmakers, tribal leaders, and major sports leagues.
Kalshi is already fighting lawsuits in Nevada, New Jersey, and Maryland from state regulators making similar arguments. In each case, judges declined to grant preliminary injunctions, allowing Kalshi to continue offering sports markets while the cases proceed.
While the earlier state-led lawsuits remain ongoing, this is the first federal lawsuit filed by tribal governments, who argue Kalshi and Robinhood’s operations infringe on rights granted to them under IGRA and their state compacts.
CA sports betting fight heats up
California has been a hotbed for legal action related to sports betting and gaming in recent months.
In July, California Attorney General Rob Bonta issued a legal opinion declaring all forms of daily fantasy sports illegal under state law. The opinion, which tribal leaders had publicly urged, prompted operators like Underdog and PrizePicks to switch to peer-to-peer formats. Tribal leaders are also advocating for a bill that would ban sweepstakes casinos and sportsbooks.
Tribes have long held exclusive rights to most forms of gambling in California and played a central role in defeating two competing sports betting ballot initiatives in 2022. Tribal leaders remain engaged in negotiations with major sportsbook operators over potential legalization framework that would give tribes full ownership and control of an online California sports betting market.
The initiative, which would be funded entirely by operators, remains preliminary, with no formal agreements reached and no target year set for a ballot initiative. Still, the talks reflect the tribes’ ongoing leverage and long-term goal of securing a legal market on their terms.
