US Appeals Court Shuts Down Prediction Markets with Sports Bet Ruling

A US Appeals Court has dealt a significant blow to prediction markets by ruling that sports contracts are essentially sports bets. The Ninth Circuit Court of Appeals rejected Kalshi, Crypto.com, and Robinhood's requests for injunctive relief against the Nevada Gaming Control Board.

The court ruled in favor of Nevada's gaming regulations, stating that these sports contracts have the hallmarks of sports betting. This decision is a major setback for prediction markets, which argue that their contracts are not bets but rather financial instruments governed by federal law.

The court also clarified that the Commodity Exchange Act (CEA) preempts state regulation of swaps traded on a Designated Contract Market (DCM), but these sports event contracts do not qualify as swaps because they are sports bets.

This ruling is significant, as it sets a precedent for other states to crack down on prediction markets. Connecticut has already filed a lawsuit against Kalshi to block its sports event contracts, and this decision may embolden other states to take similar action.