Ninth Circuit Rejects Prediction Market Challenge in State Gambling Fight
A federal appeals court has dealt a significant blow to the prediction markets industry in a state gambling fight. The Ninth Circuit Court of Appeals ruled that Nevada can enforce its gambling laws against sports-related prediction contracts, rejecting challenges from Kalshi and Crypto.com.
The court rejected Kalshi's argument that its sports contracts are federally regulated financial instruments under the Commodity Exchange Act. Instead, the unanimous three-judge panel found that the contracts were 'sports bets' rather than swaps, a type of derivative regulated by the Commodity Futures Trading Commission.
The decision conflicts with an earlier Third Circuit ruling that found New Jersey could not apply its gambling laws to Kalshi. The split raises the possibility that the Supreme Court may eventually decide whether sports-event contracts are financial instruments under federal jurisdiction or wagers subject to state gambling laws.
Shares of DraftKings and Flutter Entertainment, the parent company of FanDuel, rose following the decision as investors assessed the implications for the increasingly competitive prediction-market sector.