Ninth Circuit's 'Closed System' Reasoning and Tribal IGRA Enforcement

When the Ninth Circuit ruled on September 16, 2026 in Blue Lake Rancheria v. Kalshi, Inc., most attention went to the headline result: sports event contracts offered on tribal lands are likely Class III gaming. The reasoning beneath that result may prove at least as important. The panel's treatment of a tribe's gaming regime as a closed system under IGRA, and its conclusion that a party never signed to a compact can still violate it, bears on how tribes enforce exclusivity against any outside operator. This analysis is based on a law-firm client alert summarizing the decision rather than the opinion itself, and readers should consult the opinion for exact language.

The holding in brief

According to the alert, a unanimous panel of Judges Murguia, McKeown and Paez, with Judge McKeown writing, held that Blue Lake Rancheria and Chicken Ranch Rancheria of Me-Wuk Indians are likely to succeed on their claim that Kalshi's sports event contracts on their lands violate the Indian Gaming Regulatory Act. The panel reversed the district court's denial of relief on the IGRA claim, affirmed dismissal of a Lanham Act claim, and remanded to Judge Corley in the Northern District of California to weigh the remaining preliminary injunction factors: irreparable harm, the balance of equities and the public interest. The case is No. 25-7504.

The result is a preliminary one. The panel found a likelihood of success, not a final judgment. For how that standard works, see our explainer on the preliminary injunction standard, and for the immediate practical effects see our earlier analysis of the ruling.

The closed-system reasoning

As summarized, the court rejected two related arguments. One held that a compact is merely a contract that binds only its signatories. The other held that Kalshi could not violate a compact it never signed. The court instead described the tribes' regime as a closed system in which unauthorized gaming by anyone violates the tribal ordinance and therefore the secretarial procedures governing Class III gaming on those lands.

That framing shifts attention from the identity of the actor to the nature of the activity. The alert reports that IGRA permits a tribe to sue to enjoin Class III gaming conducted in violation of a compact, and that the focus is the activity, not who conducts it. The court also rejected the argument that only the Secretary of the Interior can enforce secretarial procedures. If that reading holds, tribes with compacts or secretarial procedures may have a private path to court against outside operators, rather than depending on federal enforcement. Our discussion of standing doctrine in tribal gaming litigation traces why that distinction has been contested.

The legal question moved from who is offering the wager to what the wager is and where it is made.

Classification and location

Two further findings carry weight. On classification, the alert says the court noted that IGRA defines Class III gaming as everything that is not Class I or Class II, that National Indian Gaming Commission regulations list "any sports betting" as Class III, and that a functional analysis applies: the user pays to take a position on an uncertain sporting outcome and collects if it occurs. On location, the court reasoned that a user who buys a contract while on a reservation enters the contract there, placing it on Indian lands. For readers new to these categories, our explainer on Class II versus Class III gaming sets out the framework.

The court also held, per the alert, that neither the Unlawful Internet Gambling Enforcement Act nor the Commodity Exchange Act displaces IGRA, and that the Commodity Exchange Act's exclusive-jurisdiction provision does not exempt a transaction from other federal statutes. That point speaks to a recurring defense in prediction-market litigation. Our mid-2026 litigation scorecard tracks how different courts have treated it.

The practical implication is that a tribal ordinance and compact are being treated as more than private agreements. If the reasoning is adopted by other courts, an outside operator that offers a covered product to people located on tribal lands could be exposed to claims even without any prior relationship to the tribe. That is a significant change from a view in which only signatories, or only the federal government, could be held to account. It would also place greater weight on how a court determines where a transaction occurs, which the Ninth Circuit answered by looking to where the user enters the contract.

Limits and open questions

Several cautions apply. The decision binds the Ninth Circuit, not the nation, and other circuits have ruled in other settings, as discussed in our report on the circuit split. The remand leaves the equitable factors undecided. Kalshi may seek further review, and the Lanham Act claim failed because the company's statement that its product is legal in all 50 states was treated as a layperson's opinion on an unsettled legal question.

The closed-system reasoning also depends on a tribe having a functioning regime, meaning an ordinance and a compact or secretarial procedures. Tribes without such frameworks for a given form of gaming may find the logic harder to invoke. Our Legal Guide to IGRA and Class III gaming explains why those instruments are the foundation of tribal enforcement.

For now, the most defensible reading is that the Ninth Circuit has given tribes a stronger argument that their gaming systems protect themselves against any outside actor, with the final outcome dependent on the remand and any further appeal.