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Native American tribes in California are mad. Again. It feels like we’ve written ad nauseam about that this year, and we have.
We’ve seen the tribes target card rooms this year. Then it was sweepstakes casinos. Now? It’s prediction markets. The common thread between all three is what the tribes view as illegal betting. Right now, they believe betting in California has to go through them under an agreement they signed decades ago.
News coming out of California is that the tribes are now taking aim at Kalshi and Robinhood, two leading players in prediction markets. Kalshi exploded in popularity after the Commodity Futures Trading Commission (CFTC) let it operate as a regulated exchange for event contracts. Robinhood is a retail favorite for investing in stocks, crypto, and now, event contracts too.
Keep reading as we unearth this story that has nationwide ramifications. Here’s what’s going on in the Golden State:
3 Tribes Band Together In New Lawsuit
Just barely in July, the Blue Lake Rancheria, Chicken Ranch Rancheria, and Picayune Rancheria filed suit in the U.S. District Court for the Northern District of California. Their 71-page complaint doesn’t mince words — Robinhood and Kalshi are illegal.
Kalshi began offering sports betting contracts this year, and its business has blown up ever since. So much so that a new round of investment values them at $2 billion. That steep value hinges deeply on offering sports markets too. Kalshi is available in states where legal sports betting isn’t available, which includes California.
Robinhood, which offers Kalshi’s markets to its own users through a derivatives arm, pushed back. A spokesperson said its event contracts are CFTC-regulated and available “in a safe, compliant, and regulated manner,” and noted that two federal courts have already ruled CFTC rules can preempt other state laws.
The lawsuit asks for an injunction to block Kalshi’s sports markets in California entirely, plus damages and attorneys’ fees. The tribes argue they hold exclusive rights to most forms of gambling in the state, and that any sports betting — prediction markets included — needs voter approval.
Prediction Markets Under Fire
This isn’t the first time Kalshi has been in a courtroom over sports. State regulators in Nevada, New Jersey, and Maryland have already tried to shut their sports markets down. In each of those states, judges denied preliminary injunctions, allowing Kalshi to keep operating while the cases play out. That’s a win in the short term, but it’s far from over.
Right now, Kalshi is being allowed to exist due to some legal grey area. It’s an even more gray area than offshore sports betting. States have had success shutting down offshore sites, but no such luck with Kalshi. Not yet at least.
For now, federal courts have yet to mark prediction markets as outright illegal. As long as the CFTC stands by its approvals, companies like Kalshi can argue they’re in a separate category from sportsbooks. Still, the tribes’ lawsuit is the first federal case brought by Native governments specifically citing IGRA violations, which is a different and potentially more powerful legal angle.
How This Could Affect Lawsuits In Other States
If the tribes win in California, it could set a precedent that prediction markets aren’t untouchable just because the CFTC regulates them. That would open the door for other states — and other tribes — to use the same argument to block or limit these platforms.
California is already a high-stakes battleground. In 2022, voters rejected both sportsbook-backed and tribal-backed sports betting ballot measures after a record-breaking $460 million campaign. Since then, tribes have successfully lobbied for stricter rules on daily fantasy sports and are pushing to ban sweepstakes casinos and card rooms, as mentioned before. But honestly, prediction markets likely pose the bigger threat.
That’s because the prediction market boom is only getting hotter and hotter. Kalshi pulled in over $500 million in March Madness volume this year. It’s already in talks with FanDuel about a possible partnership, while DraftKings has explored acquiring Railbird, a CFTC-licensed competitor. Polymarket just bought a small U.S. derivatives exchange for $112 million to position itself for a comeback in this market (it’s only available internationally for now).
Now imagine how football season is going to fare? That’s the prime betting window for all operators. This 2025 football season will be the first in which prediction markets are a significant player. Kalshi has outright said they expect a massive pick-up in business from it.
The bigger these markets get, the harder it will be for regulators and courts to ignore them. A California victory for the tribes wouldn’t just freeze Kalshi’s sports markets in the nation’s largest state — it would hand opponents a playbook to shut them down elsewhere.
This has the potential to be the biggest story in sports betting in 2025 and for years to come. Legitimately, there are hundreds of billions of dollars at stake here. So be sure to check back with us from time to time as we update the story.
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