Kalshi takes legal blow in court ruling confirming state powers over prediction markets

A federal appeals court panel in San Francisco ruled on Friday that prediction market operator Kalshi cannot resume trading on sports and election events in Nevada while it challenges the state's attempt to shut it down until it obtains a license from gambling regulators. The 9th U.S. Circuit Court of Appeals panel found that Kalshi did not provide a convincing argument that federal commodities trading law overrides Nevada's gambling law when it comes to determining who should regulate Kalshi's sports event contracts.

Nevada's attorney general's office hailed the decision as a "major victory for Nevada and our longstanding authority to regulate gaming in our state." Kalshi had attempted to bypass Nevada's laws, but the court made it clear that sports betting does not change simply because a company refers to it as an "event contract." The panel sent the question of Kalshi's trading on election contracts back to a lower court to examine Nevada's objections.

Approximately two dozen states are currently locked in litigation over prediction markets like those run by Kalshi, Polymarket, and Robin Hood. The ruling increases the chances that the U.S. Supreme Court will ultimately decide whether states can regulate prediction markets under their gambling laws after the 3rd U.S. Circuit Court of Appeals ruled earlier this year that New Jersey could not regulate Kalshi.

Kalshi stated it would seek additional review of the decision, while trading on sports, entertainment, and election contracts is currently prohibited in Nevada.