An appeals court rules states can regulate prediction markets, finding Kalshi's sports event contracts are bets, not swaps, and subject to state gambling laws (Lauren McCarthy/New York Times)

A federal appeals court has ruled that states can regulate prediction markets like Kalshi as gambling. The 3-0 ruling from the Ninth Circuit Court of Appeals found that Kalshi's sports event contracts are bets, not swaps, and are subject to state gambling laws. According to the Associated Press, the court decided that federal law likely does not preempt Nevada from applying its gambling regulations to Kalshi's sports event contracts.

The case originated from Nevada, where regulators tried to shut down the Kalshi prediction site. The appeals panel wrote that the substance of Kalshi's sports event contracts is sports gambling, regardless of whether Kalshi calls them swaps. The judges also found it "disingenuous" for Kalshi to argue in court that its products weren't sports-betting when it previously used that phrasing in marketing materials.

The ruling is a significant victory for state regulators, with Nevada's attorney general's office calling it a "major victory for Nevada and our longstanding authority to regulate gaming in our state." The decision may ultimately be settled by the Supreme Court, as there are still related lawsuits pending across the country and a split in rulings between federal courts.

Brief written by urgent.news from Techmeme, Slashdot, CoinDesk, Associated Press, Winnipeg Free Press — 5 reports on this story. Machine-written — may contain errors; check the original before relying on it.