Ninth Circuit backs state oversight of prediction markets as gambling
A three-judge panel of the 9th Circuit ruled that states may treat prediction market platforms as gambling operations, rejecting Kalshi's claim that federal commodities law gives it exclusive jurisdiction. The court determined that Kalshi's sports event contracts are effectively sports bets, not swaps. Kalshi plans to appeal the decision.
The ruling stems from a Nevada Gaming Control Board lawsuit alleging Kalshi operated without a state license. Board chair Mike Dreitzer called the decision a full vindication of the state's position that these contracts constitute sports betting. The panel's reasoning centered on the Commodity Exchanges Act's definition of swaps, which the judges determined did not cover sports event contracts.
Friday's decision directly conflicts with an April ruling from the 3rd Circuit, which allowed Kalshi to operate in New Jersey pending appeal. That circuit split, combined with active litigation in roughly twenty states and a letter from 44 states challenging CFTC authority, makes Supreme Court review increasingly likely. Kalshi has indicated it will seek further review.
This ruling could reshape the prediction market industry by giving states broad authority to impose gambling regulations, licensing requirements, and potential bans. Users of platforms like Kalshi may face reduced access depending on their state of residence, while operators could face patchwork compliance burdens across jurisdictions. The circuit split may ultimately force the Supreme Court to define the boundary between federal commodities oversight and state gambling law, with implications for how Americans engage with event-based financial products.