DraftKings and Flutter Jump After Court Rules Prediction Markets Are Gambling, Not Federally Regulated Trading

On August 28, DraftKings Inc. (DKNG) and Flutter Entertainment plc (FLUT) experienced significant stock increases following a Ninth Circuit Court of Appeals ruling. The court determined that sports-related prediction markets are gambling, not federally regulated commodities, enabling Nevada to enforce its gaming laws on these platforms.

DraftKings Inc. (DKNG) surged up to 10%, while Flutter Entertainment plc (FLUT) rose up to 8%. The court dismissed Kalshi, Crypto.com, and Robinhood's requests for injunctions to prevent the Nevada Gaming Control Board from shutting down their sports-related contracts. The Ninth Circuit's primary conclusion was that these contracts are sports bets, not swaps under federal commodity law.

This distinction is crucial as it determines which regulator controls these products. Prediction-market platforms and the Commodity Futures Trading Commission argued that these contracts are subject to federal jurisdiction, preventing states from regulating them. Forty-four states disagree, claiming these are sports betting disguised as financial instruments and should be subject to state gambling regulations.

Since Kalshi and other platforms have used this argument to offer sports betting in states where it is otherwise illegal, the ruling could significantly undermine their advantage. If adopted broadly, this decision could allow states to apply their gaming laws to sports-related event contracts, intensifying regulatory and cost barriers for prediction-market platforms and potentially limiting their operations.