After tribal gaming entities submitted an amicus curiae brief in support of New Jersey’s case against Kalshi last week, they followed this week with a similar one in Maryland, one of the most crucial battlegrounds among the District Court cases Kalshi is engaged in.
With response briefs in the Maryland case due on June 25, Kalshi responded on Tuesday with a request that the court deny the motion to allow the amicus brief to be filed in the case. Kalshi lawyers said of the tribal amicus brief:
“…The lodged brief would not be useful to the Court. Putative amici appear to represent out-of-state tribal interests with no clear stake in whether Kalshi must comply with Maryland gaming laws during the pendency of this litigation—the question before the Court on Kalshi’s preliminary injunction motion.”
The filing goes on to call the amicus brief “untimely and unhelpful,” pointing out that it does not raise any additional arguments but rather: “they simply expand upon arguments presented in Defendants’ briefs. That type of brief, which merely ‘extend[s] the length’ of a litigant’s own submissions, is disfavored.”
Kalshi also takes issue with the timing as they would have less than 48 hours from the time the amicus brief was filed to respond as Kalshi’s supplemental response brief deadline is Wednesday. The new tribal involvement raises questions around how the court, and Kalshi, will respond.
Tribal opposition rises in unison
The Indian Gaming Association, along with 27 tribes and six other tribal organizations, filed an amicus brief in Maryland on Monday spelling out the ways Kalshi’s sports contacts violate the Indian Gaming Regulatory Act (IGRA) and CFTC Rule 40.11(a). The amicus brief in Maryland mirrors the amicus curiae brief submitted just last week in support of New Jersey’s appeal against Kalshi’s preliminary injunction in that state.
The tribes argue that Kalshi’s sports contracts are an existential threat to tribal gaming operations because they are so similar to sports betting. Tribal gaming revenue directly funds investments on reservations, so the tribes have much to lose from what they deem unauthorized gambling expansion that threatens the state-regulated gambling industry.
IGRA laid the groundwork for the tribal-state compacts that give tribes the exclusive right to offer certain types of gaming in their states. The tribal organizations claim that Kalshi’s offerings violate federal IGRA law by offering what amounts to sports betting (through sports event contracts), accessible on tribal lands as Kalshi does not geofence to exclude those areas.
What’s next in Kalshi vs. Maryland?
In the case of Maryland, Kalshi is alleging that the tribal brief is representing “out-of-state tribal interests with no clear stake” in the Maryland case outcome. Maryland does not have a strong tribal gaming presence like you find in a number of other states like California, Florida, Michigan, New York, and Connecticut, for example.
Whether the tribes indeed have a stake in the Maryland preliminary injunction outcome is debatable. The tribes could possibly counter with an argument that the ruling could impact tribal compacts in other states and impact potential threats to federal IGRA law.
Kalshi also contends that the amicus brief in Maryland offers no new arguments that the Defendants haven’t already brought up. While the IGRA argument is not new, the tribes are better suited than state gaming regulators in Maryland to address potential IGRA violations, sports betting lawyer Daniel Wallach has pointed out.
The timing aspect clearly puts a strain on Kalshi in terms of constructing a response within their Wednesday supplemental brief. To that end, Wallach suggested on LinkedIn a logical alternative would be for the court to grant an extension for the response briefs. But he doesn’t expect the court to grant Kalshi’s request to deny the tribes’ motion for leave to file an amicus brief.
“If the brief is that ‘unhelpful,’ the court could just simply accord it the proper weight (either a lot or a little or none), as opposed to just denying the Tribes leave to amend,” said Wallach.
“As to the claimed untimeliness of the brief, I don’t see any undue prejudice to Kalshi. A short extension of time would cure any claimed prejudice.”
When Kalshi replies in its response briefs, the company will likely lean on some of the same core arguments that it did in Nevada and New Jersey, but could also raise some new counters.
Economic consequence could be key
In their brief submitted in the Maryland District Court, the tribes also emphasize an interpretation of the Special Rule, 40.11(a), as constituting a categorical ban of “gaming” contracts, including those relating to sporting events. They also maintain that it was “Congress’s intent that the Special Rule prevent event contracts used ‘to enable gambling’—particularly including sports betting.”
As support for the argument, the brief cites a 2010 statement from Senator Lincoln: “These types of contracts [major sporting events] would not serve any real commercial purpose. Rather, they would be used solely for gambling.”
This argument opens the possibility for Kalshi to counter-argue in defense of economic consequences of sporting events and “real commercial purpose” that the markets serve.
Kalshi also has in its corner the opinion of incoming CFTC Chairman Brian Quintenz who has maintained that “all events are commodities” and has defended the existence of sports-related derivative contracts in the past. Whether that support will bear on the present cases remains to be seen.
Kalshi legal arguments, old and new
In Kalshi’s preliminary injunction wins in Nevada and New Jersey, judges in both courts were swayed by Kalshi’s argument that the Commodity Futures Trading Commission is a federal regulator, therefore its regulations preempt state laws. Kalshi’s defendants in Maryland have argued, however, that federal preemption is only intended for a federal regulator like the CFTC to preempt other federal regulatory bodies, not to preempt the states when it comes to regulating gambling.
Kalshi could also rehash its irreparable harm argument that helped it secure preliminary injunctions in both states. The judge in the Nevada case made Kalshi’s argument succinctly in his order granting Kalshi’s preliminary injunction:
“Kalshi thus faces a ‘Hobson’s choice’: if it does not comply with the defendants’ demand to cease it faces civil and criminal liability, but if it does comply it will incur substantial economic and reputational harm as well as the potential existential threat of the CFTC taking action against it for violating the CFTC’s Core Principles if Kalshi disrupts contracts or geographically limits who can enter contracts on what is supposed to be a national exchange.”
Regardless, in the Maryland case, Kalshi will likely have to dig well beyond the federal preemption and irreparable harm arguments that largely earned the company preliminary injunction wins in Nevada and New Jersey, the latter of which is now proceeding through the Court of Appeals for the Third Circuit.
The Maryland judge in the case, Judge Adam Abelson, will have much to consider before rendering his judgement as early as next month. And that judgement could prove pivotal for future litigation between Kalshi and state gaming stakeholders, and for the future of federally-regulated sports event contracts.
