Ninth Circuit Deals Blow to Prediction Market Operators in Jurisdictional Battle
A federal appeals court has ruled in favor of Nevada's gaming regulators, deciding that state laws can be applied to prediction market operator Kalshi's sports-event contracts.
The Ninth U.S. Circuit Court of Appeals' decision comes after a conflict among federal courts over whether sports-related prediction contracts are regulated by the Commodity Futures Trading Commission (CFTC) or subject to state oversight.
The court upheld a Nevada federal judge's ruling that Kalshi must obtain a gaming license to operate in the state, rejecting related requests for injunctive relief from Crypto.com and Robinhood.
Kalshi had argued its event contracts qualified as 'swaps' under the Commodity Exchange Act, giving the CFTC exclusive jurisdiction and preempting state gaming laws. The company claimed that calling a sports bet a 'swap' made it one, but the Ninth Circuit disagreed, stating that Congress was unlikely to have displaced states' longstanding gambling authority.
The decision creates a circuit split with the Third Circuit, which held in April that New Jersey could not regulate Kalshi's sports contracts. This conflict sets the stage for the Supreme Court to resolve the dispute and establish a national answer on the regulation of prediction markets.