A comprehensive tribal coalition, representing nine organizations and 60 individual tribes, has formally entered the escalating legal debate surrounding prediction markets. The coalition filed a 45-page amicus brief this week (June 16-20, 2025) in the US Court of Appeals for the Third Circuit, supporting New Jersey’s legal case against Kalshi and directly challenging how prediction markets’ sports event contracts may infringe on tribal sovereignty under the Indian Gaming Regulatory Act (IGRA).

Tribal interests have been among the most vocal detractors of prediction markets like Kalshi since these platforms began offering sports contracts over the winter. This displeasure has been evident in public comment portals opened by the Commodity Futures Trading Commission (CFTC) earlier this year, which have been dominated by tribal concerns. In late May, acting CFTC Chair Caroline Pham also hosted a call with tribal leaders, underscoring the growing attention to these issues. The filing of this brief, by attorneys Scott Crowell and Joseph Webster (who had recently spoken about potential legal action), signals Indian Country’s official entry into the legal debate, raising the stakes at the appellate level following Kalshi’s multiple initial court victories.

Addressing IGRA Head-On: Sports Betting as Class III Gaming

A central theme of the tribal brief is how prediction markets coexist with IGRA, the federal framework for gaming on tribal lands enacted in 1988. While IGRA has been briefly mentioned in other cases, the tribal filing seeks to provide a full context. The brief contends that sports betting is included under IGRA’s Class III gaming classification (which covers traditional casino-style gaming like slots and table games), and therefore falls under IGRA’s domain.

Although sports betting is not explicitly defined within IGRA, the tribes pointed to 31 U.S. Code § 5362, which defines “bet or wager” under the Unlawful Internet Gaming Enforcement Act. This definition, which describes “the staking or risking by any person of something of value upon the outcome of … a sporting event … upon an agreement or understanding that the person or another person will receive something of value in the event of a certain outcome,” reportedly applies precisely to what Kalshi is offering. According to the attorneys, sports event contracts “stake or risk something of value upon the outcome of a sporting event based on the understanding that the person will receive something of value based on that outcome,” and therefore each contract traded on tribal land would violate IGRA.

Challenging CEA Preemption Claims

Another key issue in this debate is whether IGRA is preempted by the Commodities Exchange Act (CEA), the primary legislation governing the CFTC. In a separate Kalshi lawsuit against the state of Maryland, Kalshi had suggested that even if IGRA does include sports event contracts, the CEA’s exclusive jurisdiction provision “would displace any attempt by tribes to regulate those contracts.”

However, the tribes’ brief strongly contends that “the CEA neither preempts nor conflicts with IGRA.” It further argues that the CEA “is only preemptive with respect to lawful transactions that fall under the CFTC’s exclusive jurisdiction,” which tribes allege is not the case with sports contracts. The attorneys stated in the brief that it is “inconceivable” to believe that Congress intended the CEA to be a federal sports betting regulation “without explicitly stating as much,” particularly “in the face of comprehensive statutes and regulations governing gaming on Indian lands.” The brief further argues that accepting Kalshi’s position-that its sports event contracts (which constitute sports betting and thus Class III gaming under IGRA) are “swaps” subject to the CFTC’s exclusive jurisdiction-would implicitly require the Court to accept that Congress intended to “upend the entire federal framework for tribal government gaming” and effectively repeal many key provisions of IGRA. This, the brief warns, would create a slippery slope that throws the entire Indian gaming framework into question, potentially harming numerous states in terms of revenue sharing and job creation.

The “Almighty Special Rule” and Past Arguments

Opponents of prediction markets have consistently highlighted the CEA’s “Special Rule” amendment (7 U.S.C. § 7a-2(c)(5)(C)), enacted after the Financial Crisis of the early 2000s. This rule states that the CFTC has authority to review and disallow contracts involving certain activities in the sake of public interest, with gaming expressly mentioned as one of those activities. Furthermore, in the CFTC’s regulations for enforcing this (§ 40.11(a)(1)), the language explicitly states that entities “shall not list” contracts involving the outlined activities, including gaming, which removes some of the ambiguity. It should be noted that Kalshi has not disputed this interpretation of the Special Rule. Rather, it has successfully argued in court thus far that its contracts are simply not gaming.

Tribes contend in the brief that Kalshi has incorrectly interpreted the review process, believing that the CFTC must explicitly review and rule against contracts for them to be barred. Instead, they assert, as reported by iGaming Times from the brief, that “§ 40.11(a)(1) is a categorical prohibition on event contracts that involve gaming or activity that is unlawful under federal or state law; there is no two-step process because the CFTC has already determined that such event contracts are contrary to the public interest. Additionally, this determination negates the need for a 90-day review of such event contracts.” The attorneys also included part of a transcript between two senators who championed the Special Rule, in which they stated that their “intent” in shaping the law was to prevent “gambling through supposed ‘event contracts’.” Contracts for sporting events, they had argued, “would not serve any real commercial purpose.”

Kalshi’s past legal arguments are also being used against it. The New York-based exchange notably defeated the CFTC in court last year (2024) to offer election betting by arguing that election contracts did not constitute gaming. In doing so, as the tribes pointed out in their brief, the company explicitly differentiated election contracts from sports events. Kalshi’s attorneys had stated at the time that sports events serve “no inherent economic significance” or “any real economic value,” and the company notably refrained from using the words “bet,” “gamble,” or “wager” in that context. Yet, since embarking on sports contracts, that messaging has reportedly changed, with the brief citing an April article from Dustin Gouker’s Event Horizon newsletter pointing out several instances where Kalshi referred to its contracts as sports betting, a point also cited in other cases against Kalshi.

The tribal coalition’s amicus brief concludes by respectfully requesting that the Court reverse the District Court’s decision granting Kalshi’s motion for preliminary injunction, aiming to ensure that tribal sovereignty over gaming is protected and that prediction markets do not circumvent established gambling laws. This legal action marks a significant escalation in the ongoing national debate over the regulation and legality of sports prediction markets.