In this episode of Prediction News Update, Chris Gerlacher and Daniel Wallach discuss the rapidly evolving legal battles surrounding prediction markets, with a focus on Kalshi’s ongoing litigation in Maryland and additional states. The episode also highlights the entry of Native American tribes into the legal fray, their amicus brief supporting New Jersey, and the broader implications in the defense of tribal gaming exclusivity.
The discussion also touches on the potential Kalshi-FanDuel partnership, as reported by FrontOfficeSports, and its potential impact on the competitive landscape. Subscribe to the Prediction News channel for future updates!
Maryland-Kalshi court case update
The court requested additional briefing on judicial estoppel and other issues in the Maryland case against Kalshi. Both Kalshi and Maryland filed supplemental briefs, focusing on whether Kalshi’s previous statements in other cases should prevent it from taking a different position now. Maryland is also arguing that federal law (specifically CFTC Rule 40.11) prohibits sports event contracts, while Kalshi maintains that only the CFTC can enforce its own rules.
According to Wallach:
“Kalshi’s position on judicial estoppel is that whatever they said in the DC circuit… was not the issue at play in that case…The issue in the case was somewhat related but the result…does not mean that Kalshi should be stopped from arguing something else about sports betting in the current case because the first case was about political event contracts.”
The outcome of the Maryland case is pivotal for a number of reasons, Wallach points out during the episode.
The New Jersey appeal and multi-state litigation
Kalshi requested a delay in the expedited appeal in New Jersey, citing the heavy workload on its legal team due to simultaneous cases in multiple states. Kalshi certainly has its hands full, as five new states (South Carolina, Ohio, Illinois, Kentucky, Massachusetts) have initiated lawsuits against Kalshi, its market maker Susquehanna, and Robinhood.
These state lawsuits raise questions about whether prediction markets constitute gambling under state law and whether market makers are acting as sportsbooks. It also “places a bullseye on the process or at least the role of market makers,” Wallach points out.
Potential Kalshi-FanDuel partnership
Reports of a possible partnership between Kalshi and FanDuel could bring prediction markets to millions of sportsbook users. The partnership is seen as a way for sportsbook operators to access a 50-state market without the burdens of state-by-state regulation, but it risks alienating state regulators and tribal partners.
According to Wallach:
“The optics of being seen abandoning state-by-state regulation potentially could put these companies sideways with their Native American would-be partners and sideways with some of the state regulators who are on the front lines battling Kalshi.”
The discussion underscores the delicate balance sportsbook operators must strike between innovation and maintaining regulatory relationships, especially with tribal gaming interests.
Native American tribes’ amicus brief
Native American tribes are filing an amicus brief in the Third Circuit, arguing that Kalshi’s contracts violate the Indian Gaming Regulatory Act (IGRA) by offering what constitutes gaming on tribal lands.
The tribes claim Kalshi’s activities threaten tribal gaming revenue and sovereignty, as Kalshi does not geofence to exclude users on tribal lands. Wallach sums up the tribal arguments against Kalshi as such:
“The essence of the IGRA argument is that these contracts are available on Indian lands in violation of IGRA-approved contracts and therefore it violates the federal Indian Gaming Regulatory Act. So the contracts by themselves violate federal law to the extent that they’re available on Indian lands and Kalshi does not geofence their traders based on whether it’s on reservation or off reservation.
“And according to Kalshi and some of the affidavits and declarations that they have submitted in the federal court cases, they don’t geolocate and it would cost them…tens of millions of dollars if they were forced to utilize sophisticated geolocation technology. And for that reason, the threats being made against them by state governments would cause them irreparable harm by requiring them to have to geolocate customers on a state-by-state basis, which they’re currently not doing.”
This is a pivotal new legal argument, as it brings federal Indian law and tribal sovereignty directly into the debate, potentially influencing both state and federal court outcomes and increasing pressure on the courts to address tribal concerns.
Broader industry implications
The outcome of these cases, especially in Maryland and the Third Circuit, could set national precedents for how prediction markets are regulated and future actions by additional states. Tribal involvement is expected to increase, with the possibility of more briefs and legal actions in other jurisdictions.
Wallach notes:
“This is the beginning of what is going to be a very active period in which the tribes are heard on this issue in the federal courts. It makes sense for them to pursue relief in the federal courts because they’re not going to get relief from the federal agency…”
The entry of tribal stakeholders signals a new phase in the legal battle, with broader implications for market access, regulatory authority, and the balance of power between federal, state and tribal interests. Stay tuned: Subscribe to the Prediction News YouTube channel here.
