Court Lets States Regulate Prediction Markets as Gambling
Court Lets States Regulate Prediction Markets as Gambling
The News
A federal appeals court ruled Friday that states can regulate prediction markets as gambling, a major blow to the booming industry.
The Ninth Circuit Court of Appeals held that sports-related event contracts are not swaps, meaning Kalshi cannot block Nevada from overseeing its sports prediction markets.
The 3-0 ruling came from a panel of three Trump-appointed judges and directly contradicts a Third Circuit decision from April that sided with Kalshi against New Jersey.
The Legal Fight
The core question is whether Kalshi's sports contracts are federally regulated financial derivatives or state-regulated gambling. The answer decides which licensing rules, consumer protections and tax obligations apply.
Kalshi has claimed its platform is legal in all 50 states. Connecticut officials called that claim misleading.
Timeline
Sports event contracts made up 80% to 90% of Kalshi's offerings.
The Third Circuit sided with Kalshi, halting New Jersey's enforcement effort.
Connecticut Attorney General William Tong sued Kalshi, alleging the company runs an unlicensed sports betting operation and marketed its contracts as legal alternatives to regulated sportsbooks.
The Ninth Circuit ruled that states may regulate prediction markets as gambling, rejecting Kalshi's bid to block Nevada oversight.
Reactions
Connecticut's lawsuit alleges Kalshi marketed itself as "The First Nationwide Legal Sports Betting Platform." The state also alleged Kalshi used a 15-year-old video game streamer as a paid affiliate and ran an ambassador program at Yale tied to sports wagering.
Washington and New York have filed separate lawsuits against Kalshi making similar claims.
What's Next
With two federal appeals courts now split, legal experts expect the Supreme Court to settle the question. Multiple state suits remain active in the meantime, and the conflicting rulings leave Kalshi's status unsettled in states that have not yet sued.
More
Poll question for readers: Should sports prediction markets be regulated as gambling or as financial derivatives?
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