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From CLARITY to Blue Lake: A Comprehensive Guide to Tribal Gaming’s Gains in the Prediction Market Fight

By jili tutorial · September 18, 2026

From CLARITY to Blue Lake: A Comprehensive Guide to Tribal Gaming’s Gains in the Prediction Market Fight

Overview: A Pivotal Week for Tribal Sovereignty in Gaming

The intersection of federal commodities law, tribal gaming rights, and prediction markets has become one of the most contentious regulatory battlegrounds in the United States. In a single week, tribal gaming interests scored significant victories on two separate fronts—one in the U.S. Senate and one in the Ninth Circuit Court of Appeals. These developments, while not resolving the underlying dispute, have reshaped the legal and legislative landscape for federally regulated sports-event contracts and their interaction with the Indian Gaming Regulatory Act (IGRA).

This guide unpacks the key events, explains the legal and regulatory context, and examines what the outcomes mean for tribes, prediction market operators, and federal agencies. It is designed not only to report the facts but to provide deeper understanding of the forces at work.

The Two Victories: A Week of Favorable Outcomes

Legislative Front: Senate Fails to Advance the CLARITY Act

On Tuesday, the U.S. Senate held a cloture vote on the Digital Asset Market Clarity Act (CLARITY Act), a bill aimed at providing regulatory clarity for digital assets and certain financial products. The vote failed 49–50, falling well short of the 60 votes needed to advance the legislation.

For tribal organizations—especially the Indian Gaming Association (IGA) —this outcome was a deliberate objective. For months, tribal leaders had pushed for explicit protections for IGRA, tribal-state gaming compacts, and tribal gaming authority within the bill. When those protections were not included, the IGA actively opposed the legislation’s advancement.

Why tribal groups opposed CLARITY:

IGA Chairman David Z. Bean called the vote an “important victory for Tribal sovereignty,” but warned that the fight was far from over.

The broader legislative context: CLARITY was also entangled in other disputes, including unresolved ethics and divestment provisions concerning federal officials’ digital-asset holdings. Tribal gaming was only one of several contentious issues surrounding the bill. Nevertheless, the defeat gave tribal advocates precisely what they had sought: a legislative pause.

Judicial Front: Ninth Circuit Rules in Favor of Two California Tribes

Just one day after the Senate vote, the Ninth Circuit Court of Appeals handed tribal gaming a major legal victory. The court ruled that Blue Lake Rancheria and Chicken Ranch Rancheria are likely to succeed in their claim that Kalshi’s sports event contracts violate IGRA when offered on tribal lands.

This decision reversed a lower district court ruling and sent the case back for consideration of remaining preliminary-injunction factors.

The Ninth Circuit’s opinion focused on a functional, rather than formal, interpretation of what constitutes “gaming” under IGRA. The panel wrote:

“IGRA does not ask whether the operator labels the product a bet or an event contract, or something else. It asks what the activity looks like.”

This means that even if a product is called an “event contract” by a federally regulated exchange (like Kalshi), if it functions like a sports bet—predicting the outcome of a game—it can be classified as Class III gaming under IGRA. When that activity occurs on tribal lands, it falls within the tribe’s exclusive regulatory authority under IGRA, unless permitted by a tribal-state compact.

Rejecting Kalshi’s Defenses

Kalshi had raised two main legal defenses, both rejected by the court:

  1. Commodity Exchange Act (CEA) exclusive jurisdiction: Kalshi argued that because the CFTC has exclusive jurisdiction over commodity futures and options, IGRA cannot apply. The Ninth Circuit disagreed, finding that the CEA does not explicitly preempt IGRA claims.

  2. Unlawful Internet Gambling Enforcement Act (UIGEA): Kalshi pointed to UIGEA’s carveout for certain CFTC-regulated transactions, claiming it shielded them from gaming laws. However, the court noted that UIGEA expressly says its definitions do not “alter” or “limit” other federal or state laws. Therefore, other statutes—including IGRA—can treat the same activity according to their own definitions.

Building on Earlier Precedent

This ruling did not emerge from a vacuum. On August 28, a different three-judge Ninth Circuit panel, in Nevada v. Kalshi, had already rejected a similar UIGEA argument in a state-level context. In a footnote, that panel emphasized that UIGEA’s carveout does not displace state gaming laws. The Blue Lake panel now extended that reasoning to tribal gaming, concluding that UIGEA does not preempt IGRA.

The Unresolved Front: CFTC Continues to Assert Authority

While Congress and the courts delivered favorable outcomes for tribes, the CFTC remains the central, unresolved front in this dispute. The agency has not backed down from its position that it has authority to regulate sports event contracts as commodity derivatives under the CEA.

Tribal Criticisms of the CFTC

During a Senate Indian Affairs Committee roundtable on August 4, tribal leaders challenged both the CFTC’s substantive authority and its failure to conduct formal government-to-government consultation.

NCAI President Mark Macarro warned:

“So make no mistake, nothing in the legislative history of the CEA suggests that Congress ever intended the CFTC to become a backdoor regulator of gaming.”

Oklahoma Indian Gaming Association Chairman Matthew Morgan accused the CFTC of:

Agency Actions in July and August

The CFTC has acted forcefully to protect access to its regulated markets:

These actions do not address whether sports event contracts violate IGRA or state gaming laws. Instead, they highlight the fundamental regulatory divide: tribes view the contracts as gaming subject to IGRA, while the CFTC views them as commodity derivatives subject to its oversight.

A Call for Consultation Falls Short

On the day before the Senate vote, leaders from 17 tribal organizations met with CFTC Chairman Michael S. Selig. Both the National Congress of American Indians (NCAI) and the IGA welcomed the meeting but said it fell short of the formal government-to-government consultation they had requested.

The agency has given no public indication that the Senate vote or the Ninth Circuit ruling have changed its position.

What the Ninth Circuit Ruling Means for Active Tribal Cases

The Blue Lake opinion will now reverberate through several ongoing lawsuits.

Upcoming Hearings

The Wisconsin Ho-Chunk Nation Case

In a related case, the Ho-Chunk Nation is in a different procedural posture. A Wisconsin federal judge found that the Nation was likely to succeed on its IGRA claim and that neither the CEA nor UIGEA preempted its authority. However, the judge denied a preliminary injunction because the Nation could not demonstrate irreparable harm.

That case is now stayed while Kalshi and Robinhood seek Seventh Circuit review of two certified IGRA questions. The Ninth Circuit’s ruling, while not binding on the Seventh Circuit, could influence how that court approaches similar issues.

To fully appreciate the stakes, it helps to understand the primary statutes and agencies involved.

The Indian Gaming Regulatory Act (IGRA)

Enacted in 1988, IGRA established the framework for regulating gaming on tribal lands. It divides gaming into three classes:

Sports-event contracts from Kalshi, if they function as sports bets, would constitute Class III gaming under IGRA. That means they cannot lawfully be offered on tribal lands without a compact.

The Commodity Exchange Act (CEA)

The CEA grants the CFTC exclusive jurisdiction over commodity futures and options. In recent years, the CFTC has allowed event contracts (contracts that pay out based on the outcome of a future event) to trade on regulated exchanges like Kalshi. The agency’s position is that these are commodity derivatives, not gambling.

The key tension: the CEA does not explicitly carve out tribal gaming. The CFTC argues its jurisdiction is plenary; tribes argue that IGRA, as a later and more specific statute, limits the CFTC’s reach onto tribal lands.

The Unlawful Internet Gambling Enforcement Act (UIGEA)

UIGEA aims to prevent the use of financial instruments for illegal internet gambling. It includes a carveout for certain CFTC-regulated transactions, meaning those transactions are not considered “unlawful internet gambling” for purposes of UIGEA. However, as the Ninth Circuit noted, that carveout does not alter or limit other federal or state laws, including IGRA. So even if a transaction is exempt from UIGEA, it can still violate IGRA.

What This Means for Stakeholders

For Tribal Nations

For Prediction Market Operators (Kalshi, Robinhood)

For the CFTC

For State Regulators

States like Nevada and New York have their own lawsuits against Kalshi. The Ninth Circuit’s reasoning on UIGEA and functional gaming tests could influence those cases as well.

The Road Ahead: Three Parallel Battles

The fight over prediction markets and tribal gaming is unfolding on three tracks:

  1. Congressional: Tribal groups will continue to lobby for explicit IGRA protections in any digital asset or event contract legislation. The CLARITY defeat gives them leverage.
  2. Judicial: The Blue Lake case returns to district court; New Mexico and Wisconsin cases will test whether the Ninth Circuit’s reasoning spreads.
  3. Regulatory (CFTC): The agency remains the most unpredictable front. Its next move—whether to issue a formal rule on sports event contracts, or to intervene in more state lawsuits—will be critical.

Conclusion: A Shifting Landscape, Not a Final Resolution

The week’s outcomes—the failed CLARITY vote and the Ninth Circuit ruling—represent meaningful wins for tribal sovereignty. But neither resolves the central regulatory disagreement: Where does federal commodities authority end and tribal gaming law begin?

The CFTC has shown no willingness to retreat. Tribal nations are prepared to litigate and lobby. Prediction markets face a growing legal mosaic. The fight is far from over, but for the moment, tribal gaming has gained significant ground.