Ninth Circuit rules states may treat prediction markets as gambling
The U.S. Ninth Circuit Court of Appeals held that prediction-market platforms such as Kalshi fall under state gambling regulations, marking the first appellate decision to side with states in the dispute.
A three-judge panel of the Ninth Circuit Court of Appeals ruled Friday that prediction-market platforms can be regulated under state gambling laws. The decision, issued by judges appointed during the Trump administration, arose from a Nevada lawsuit seeking to shut down the Kalshi exchange.
The court found that contracts offered on Kalshi that are tied to sports outcomes constitute sports gambling, rejecting the company's argument that they are merely derivatives swaps. The panel also criticized Kalshi for previously describing its products as sports betting in marketing materials.
Kalshi said it will appeal the ruling, with spokesperson Dani Lever stating that the company believes CFTC regulations do not prohibit sports contracts and that the agency is working to clarify the rules.
Nevada Governor Joe Lombardo said the decision helps protect the integrity of the state's gaming industry, and Mike Dreitzer, chair of the Nevada Gaming Control Board, said it validates the board’s long-standing position.
The ruling creates a split among federal appellate courts, as the Third Circuit previously ruled in favor of prediction-market operators in a New Jersey case. Legal analysts note the divergence could prompt a review by the Supreme Court.
The Ninth Circuit’s opinion now serves as binding precedent for federal judges in California, Arizona and six other states that have pursued similar regulatory actions. Prediction-market sites have seen rapid growth, with Kalshi reporting billions of dollars in weekly trading volume, primarily from sports markets.