Nevada Gains Power to Regulate Sports Prediction Markets

On August 28, the Ninth Circuit Court of Appeals made a ruling that sports-related event contracts offered by prediction-market platforms are not classified as swaps under federal commodities law. This decision paved the way for Nevada to apply its own gaming regulations to these products. The ruling denied requests for injunctive relief from three platforms - Kalshi, Crypto.com, and Robinhood - which had asked the court to prevent the Nevada Gaming Control Board from shutting down their sports-outcome contract offerings within the state.

The court determined that these contracts function as sports bets rather than federally regulated swaps, thus falling within the scope of state gambling law. This ruling is a significant development in a broader legal battle between prediction-market operators and the Commodity Futures Trading Commission (CFTC), who argue that these contracts qualify as swaps under federal jurisdiction and thus cannot be regulated by states.

With 44 states supporting the prediction-market operators' position, this ruling could give Nevada significant regulatory power over these products. The stock prices of platforms like Kalshi, Crypto.com, and Robinhood saw a significant increase following the ruling, with DraftKings and Flutter also experiencing gains, indicating that the legal outcome may have a substantial impact on the competitive landscape of sports betting.

However, the legal uncertainty surrounding this ruling remains, as some analysts believe that a nationwide resolution is more likely to involve a patchwork of regulatory approaches rather than a single, clean ruling.