Ninth Circuit Rules Against Prediction Markets in Landmark Sports Betting Decision
The Ninth Circuit Court of Appeals has dealt a significant blow to prediction markets in their fight against state regulators over sports-related event contracts. The court ruled in favor of the Nevada Gaming Control Board, rejecting Kalshi, Crypto.com, and Robinhood's requests for injunctive relief.
In its opinion in the Kalshi case, the panel stated that the Commodity Exchange Act (CEA) likely does not preempt Nevada's gaming regulations as applied to Kalshi's sports event contracts. The court clarified that the CEA expressly preempts state regulation of swaps traded or executed on a Designated Contract Market (DCM), but noted that Kalshi's sports event contracts were not swaps because they were sports bets.
The panel stated that the sports event contracts had 'the hallmarks of sports betting' and applied the Major Questions Doctrine, which suggests that Congress delegated power to the CFTC to regulate gambling when it passed Dodd-Frank. States have long regulated the gaming industry, leading to a crackdown on prediction markets as state regulators argue they operate as unlicensed sports betting platforms.
Commenting on the court's ruling, legal expert Daniel Wallach noted that Kalshi can either seek a rehearing en banc or go straight to the Supreme Court. He expects the latter, particularly since the platform lost this appeal before three Trump-appointed judges.