New Mexico Tribes File Lawsuit Against Kalshi as Minnesota Enacts Ban on Prediction Markets

(AsiaGameHub) –   Legal hurdles are a daily occurrence for prediction markets. The most recent lawsuit targeting Kalshi has been initiated by a coalition of New Mexico tribes.

Concurrently, legislators in Minnesota have passed a bill designed to outlaw various prediction markets, specifically those concerning elections and sports.

The lawsuit was filed by the Mescalero Apache Tribe, Pueblo of Isleta, Pueblo of Pojoaque, and Pueblo of Sandia. They accuse Kalshi of breaching Indian gaming compacts through the provision of unlawful gaming operations.

Tribes Allege Kalshi Facilitates Unlawful Sports Wagering

Kalshi contends its platform differs from sports betting, citing that it neither functions as the house nor directly accepts wagers. This assertion has been dismissed by the tribes.

“Determining if an activity qualifies as ‘gaming’ under IGRA is not contingent on whether participants wager against the ‘house’ or one another,” the lawsuit asserts.

The filing also references a past statement from a Kalshi attorney: “Contracts pertaining to games are likely unsuitable for listing on an exchange, as they lack genuine economic utility.”

It further notes, “The sports event contracts offered by Kalshi possess all the defining traits anticipated by sports bettors in gambling: moneyline bets (predicting the winner), over/unders (total combined points), point spreads (margin of victory), prop bets (specific in-game events), and parlays (combined outcomes).”

Consequently, the tribes contend that sports prediction markets warrant classification as sports betting. Current New Mexico statutes restrict legal sports wagering to in-person transactions at tribal casinos.

Varying Outcomes for Other Tribal Litigation

This marks the third instance of tribal entities suing Kalshi, succeeding previous legal actions filed in California and Wisconsin last year.

In Wisconsin, a judge denied Kalshi’s request to dismiss the lawsuit filed by the Ho Chunk Nation, a case backed by tribal organizations nationwide.

Meanwhile, the Ninth Circuit in California declined the tribes’ motion to consolidate their appeal with a Nevada prediction market case. 

The Blue Lake Rancheria, Chicken Ranch Rancheria of Me-Wuk Indians, and Picayune Rancheria of the Chukchansi Indians had petitioned the Ninth Circuit to route their appeal against Kalshi and Robinhood to the panel overseeing the Nevada litigation.

Nevada has proven the most effective state in combating prediction markets, standing alone in compelling Kalshi to exit the market.

“Given the substantial distinctions between this appeal and North American Derivatives Exchange, Inc. v. State of Nevada … the motion to transfer this appeal to the panel that heard argument in that matter … is DENIED,” a court order declared.

Minnesota Enacts Prohibition on Sports Prediction Markets

In other developments, Minnesota legislators have approved a bill specifically outlawing sports prediction markets. The House passed SF4760 with a 100-32 vote, following a prior 57-9 approval in the Senate.

This legislation is part of a broader Public Safety policy package. The provisions addressing prediction markets would bar operators from facilitating contracts on the following topics:

• Sports & Games: Athletic competitions, individual player performance, and games utilizing cards, dice, or electronics.
• Crises & Disasters: Conflicts, emergencies, disasters, shootings, terror, and health crises.
• Human Events: Specific events involving individuals or groups.
• Government & Politics: Elections and behavior of officials/agencies.
• Legal Proceedings: Lawsuits, trials, settlements, verdicts.
• Violence & Mortality: Deaths, assassinations, mass casualty events.
• Weather: Short-term forecasts and environmental events.
• Pop Culture: Awards and release dates.
• Statements: Forecasts regarding specific utterances by individuals.

The bill now awaits the signature of Governor Tim Walz. Upon enactment, state officials would gain the authority to issue cease-and-desist orders to non-compliant firms. Kalshi is a probable target for such an order and would likely retaliate by filing suit against the state.

Kalshi maintains that state regulations are inapplicable, asserting that its operations fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC). The CFTC has pledged to support licensed operators and has intervened in legal battles across multiple states.

The controversy surrounding the legality of sports prediction markets persists. Attorney Melinda Roth remarked this week that while the CFTC is the fitting regulator for sports-event contracts, the final decision on lawfulness rests with the Supreme Court.

A ruling is not anticipated before 2027. Until then, anticipate continued litigation and legislative attempts to curb activities viewed by many as illicit sports betting.