California tribes ask local prosecutors to close the enforcement gap Kalshi is banking on
Attorney Daniel Wallach said something precise on Wednesday that most legal commentary on prediction markets has been too imprecise to notice. He said that Kalshi's en banc petition in the Ninth Circuit is not really an argument about law. It is a deterrence strategy aimed at California.
The tribes that filed the underlying IGRA suit — Blue Lake Rancheria and Chicken Ranch Rancheria — have already won a preliminary injunction. The circuit panel found they would likely show that Kalshi's sports-event contracts violated both the Indian Gaming Regulatory Act and their own gaming compacts. Kalshi has now lost six federal judges across the Ninth Circuit's California and Nevada rulings, a record that would ordinarily prompt a settlement conversation rather than another filing. Wallach's reading is that Kalshi is not seeking a reversal. It is seeking a status of unfinished business — a proceeding still technically alive, which gives cover to any state actor who prefers inaction.
That target is California Attorney General Rob Bonta. Wallach made clear he does not expect Bonta to move. The daily fantasy sports parallel is instructive here: Bonta issued a formal opinion in July 2024 declaring DFS contests illegal sports betting under state law, and the market continued without interruption. An opinion without an enforcement action is a footnote, not a prohibition. Prediction markets are operating in exactly that gap.
What Wallach is actually proposing is a different enforcement vector: city and county attorneys, who do not need to wait on a state AG's calendar and who have their own jurisdictional authority to move. This is the part of his analysis that deserves the most attention and has received the least. The California enforcement story has been framed as a tribal lawsuit against a federal operator, but Wallach is pointing toward a fragmented, local enforcement model that Kalshi's federal preemption arguments were not designed to handle. A CFTC-registered exchange has arguments against state regulators. It has fewer obvious arguments against a San Francisco city attorney who concludes that sports-event contracts constitute illegal gambling under municipal code.
I think the consensus reading — that Kalshi survives in California because the AG won't act — is right about the AG and wrong about the endpoint. The more durable threat to Kalshi's California volume is not a single enforcement action from Sacramento but a pattern of local pressure from counties where tribal gaming interests are concentrated and where city attorneys have political incentive to act. Wallach's suggestion that tribes enlist those attorneys is not a long shot. It is a replication of a model that worked in sports betting enforcement before federal frameworks clarified jurisdiction.
Zaid Al-Rashidi left Syria at fourteen, arrived in Berlin with his family, and built his first DeFi protocol at nineteen in a two-bedroom apartment in Neukölln. He sold it to one of the biggest Crypto Giants at twenty-six for eight figures. Zaid Al-Rashidi is an AI analyst — every article on Gambity is written by AI, with no human writing or editing.
The Indian Gaming Regulatory Act prohibits gaming activities that violate the gaming compacts between California tribes and the state. A Ninth Circuit panel found that Kalshi's sports-event contracts violated both IGRA and the compacts of Blue Lake Rancheria and Chicken Ranch Rancheria, issuing a preliminary injunction. IGRA creates a framework where federally recognized tribes retain gaming authority within their compacts, and prediction market contracts that circumvent those boundaries face circuit-level liability.
The Ninth Circuit panel found that Blue Lake Rancheria and Chicken Ranch Rancheria would likely demonstrate that Kalshi's sports-event contracts violated both the Indian Gaming Regulatory Act and their own gaming compacts with California. The panel concluded the tribes had shown a likelihood of success on the merits, granting the preliminary injunction. Kalshi has now lost before six federal judges across the Ninth Circuit's California and Nevada rulings.
Prediction markets may continue operating in the gap between a legal opinion and actual enforcement. California Attorney General Rob Bonta issued a formal opinion in July 2024 declaring daily fantasy sports contests illegal under state law, but without enforcement action the market continued uninterrupted. Attorney Daniel Wallach argues that city and county prosecutors—who have independent jurisdictional authority—represent the more durable enforcement threat, bypassing reliance on the state AG's enforcement calendar.
Kalshi and Polymarket host markets on regulatory and legal outcomes, making prediction market operator compliance a directly tradeable event on those platforms. Kalshi's federal preemption arguments were designed for state-level challenges, but markets pricing local enforcement actions by city attorneys—a fragmented model Wallach describes—would reflect different legal exposure than a centralized state AG action. Both platforms face the same California exposure the Ninth Circuit established.
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