Prediction Markets on Trial: Kalshi, Robinhood, and the Legal Crossroads of Sports Betting

By Heidi McNeil Staudenmaier and Caitlin Vanderkarr

Across U.S. sports betting markets, Kalshi remains a topic of debate. The core question: does Kalshi legally offer sports event contracts within federally regulated financial prediction markets, or does Kalshi operate illegal sports betting in violation of state and tribal gambling laws? California courts and the Third Circuit have both recently been tasked with evaluating both positions.

Tribal Suit Against Kalshi

On July 22, 2025, the Blue Lake Rancheria, Picayune Rancheria of the Chukchansi Indians, and Chicken Ranch Rancheria of Me-Wuk Indians (the California Tribes) brought suit in the Northern District of California against Kalshi Inc. and a related entity (collectively, “Kalshi”), and co-defendants Robinhood Markets, Inc. and Robinhood Derivatives LLC (collectively, “Robinhood”, and with Kalshi, collectively referred to as “the Kalshi Parties”).¹ The California Tribes seek declarative and injunctive relief against the Kalshi Parties, most recently through a Motion for Preliminary Injunction filed on September 4, 2025 (scheduled for hearing on October 23, 2025).²

While Kalshi offers the sports event contracts, Robinhood provides the app and user base to facilitate engagement in Kalshi’s market, including on tribal lands.³ The California Tribes seek to prevent the Kalshi Parties from offering sports event contracts on their tribal lands, alleging such activities violate the Indian Gaming Regulatory Act (IGRA), along with state and tribal laws.⁴

IGRA grants tribes the exclusive right to regulate and conduct gaming on their lands, including sports betting (pursuant to a tribal-state compact).⁵ The California Tribes’ complaint asserts that the Kalshi Parties’ sports contracts divert revenue from tribal casinos, expose tribal communities to unregulated gambling without proper consumer protections, and frustrate IGRA’s purpose of supporting tribal economic self-sufficiency and tribal sovereignty.⁶

The complaint also cites concern for public safety, emphasizing the California Tribes’ view that sports event contracts are unregulated sports betting, without licensing, regulatory oversight, or consumer protections against problem gambling and corruption.⁷ The California Tribes allege that the Kalshi Parties engaged in misleading advertising by marketing Kalshi’s sports event contracts as legal nationwide sports betting.⁸ Finally, the complaint asserts that 18-year-old high school students on reservations can place sports bets through their phones, as the Kalshi Parties allegedly do not employ proper age verification.⁹

Kalshi’s CFTC Third Circuit Appeal

In parallel, Kalshi has appealed the Commodity Futures Trading Commission (CFTC) decision denying Kalshi’s application to offer sports event contracts to the Third Circuit Court of Appeals.¹⁰ Kalshi alleges that Congress provided the CFTC “exclusive jurisdiction” over swaps under the Commodity Exchange Act (CEA).¹¹ The court underscored during oral arguments its position that only Congress, and not the court, could narrow a broad grant of authority by Congress.¹² The Third Circuit Court noted that it would not overrule Congress’ intent where such intent is clear within the plain language of a statute.¹³

Kalshi contends it is not conducting illegal gambling and that sports event contracts are financial instruments that allow for risk management and information sharing under CFTC authority.¹⁴ Opponents argue that Kalshi’s sports event contracts violate state gambling laws and facilitate placement of unregulated sports bets.¹⁵ Kalshi’s opponents include gaming regulators, gaming organizations, and tribes.

The court’s ruling in the Third Circuit is expected to address federal-state gambling preemption questions surrounding sports event contracts, with significant consequences anticipated for prediction markets and tribal gaming alike. Nevertheless, ongoing litigation in other circuits could add to the complexity of any particular circuit court decision.

Kalshi Faces Suit Across the U.S.

Snell & Wilmer previously described Kalshi’s litigation against several states, including Maryland, Nevada, and New Jersey, regarding the legality of sports event contracts.¹⁶ Kalshi succeeded in obtaining preliminary injunctions in Nevada and New Jersey, but failed to obtain such injunction in Maryland.¹⁷

More recently, Massachusetts Attorney General Andrea Joy Campbell sued Kalshi for offering its sports event contracts in the state, purportedly to compel Kalshi to seek a license.¹⁸ Robinhood then sued Campbell and the Massachusetts Gaming Commission to enjoin enforcement against Kalshi.¹⁹

In Wisconsin, the Ho-Chunk Tribe initiated suit against Kalshi and Robinhood alleging state and tribal gaming law violations.²⁰ None of the foregoing cases have reached their final conclusion as of this writing.

What Happens Next?

A swift and conclusive resolution of this ongoing litigation is unlikely. The financial stakes are high on both sides. Given the continuing litigation, it may be necessary for Congress to clarify CEA language and its intent for U.S. gaming and financial markets.