U.S. appeals court rules against prediction markets, sets up likely fight at Supreme Court

The 9th Circuit Court of Appeals on Friday sided with states in a battle over which level of government has the authority to regulate prediction markets, rejecting Kalshi's attempts to prevent Nevada from overseeing gambling activities on its platform. The court ruled that Kalshi's prediction market contracts, though labeled as swaps, are essentially sports bets and thus fall under state gambling laws, rather than federally regulated commodity futures trading.

The ruling comes as roughly 20 states are currently embroiled in legal disputes over prediction markets, and experts predict the conflict may ultimately reach the Supreme Court. Although a separate decision in April had given the Commodity Futures Trading Commission exclusive control over sports-related event contracts on Kalshi, the 9th Circuit disagreed, emphasizing that federal law prohibits states from regulating trading on a federally licensed exchange like Kalshi.

Nevada's Gaming Control Board hailed the ruling as a victory, asserting that sports betting must be regulated at the state level to protect residents from gambling harms. Kalshi spokesperson Dani Lever maintained that the CFTC's regulations, as written, do not prohibit sports contracts and that the company will continue to seek further review.