Appeals Court Sides with Nevada in Kalshi Prediction Market Row

Kalshi’s legal battle over sports event contracts has taken a hit after a federal appeals court ruled that Nevada can apply its gambling laws to the prediction market operator. Court Rejects Kalshi’s Claim That CFTC Rules Override Nevada Law On August 28, the 9th US Circuit Court of Appeals unanimously rejected Kalshi’s bid to prevent Nevada gaming regulators from regulating its sports contracts. The ruling upheld a previous decision by a federal judge in Las Vegas who had lifted an injunction that had temporarily allowed the company to continue selling the contracts in the state. The dispute surrounds whether Kalshi’s sports contracts are financial products regulated under federal commodities law or sports wagers regulated under state gambling laws. Kalshi has argued that its event contracts are swaps, and as such are subject only to the jurisdiction of the US Commodity Futures Trading Commission (CFTC). The company says federal law prevents states from imposing their own gaming rules on an exchange that is registered with the federal regulator. The appeals court saw it differently. The panel held that the contracts at issue have the essential characteristics of sports betting and thus do not enjoy the federal protection sought by Kalshi. The judges also dismissed the argument that Congress meant financial-market legislation to strip states of their traditional powers over gambling. The ruling gives Nevada regulators more leeway in pursuing enforcement against Kalshi, which has been accused of providing sports betting services without the state license required. Kalshi Faces Split Court Rulings as Supreme Court Review Looms Nevada Gaming Control Board Chairman Mike Dreitzer said he welcomed the decision and that the state remains committed to enforcing its gambling laws and protecting consumers. The American Gaming Association supported the move, saying letting states regulate contracts around sports events would enhance existing consumer protections and gaming frameworks. Kalshi, however, said the legal battle is not finished. The company says it plans to pursue more judicial review and contends that federal law gives the CFTC primary jurisdiction over its marketplace. The Nevada ruling is particularly significant because it conflicts with a ruling from the 3rd US Circuit Court of Appeals. In April, a federal court rejected New Jersey’s efforts to regulate Kalshi, saying the company’s sports contracts fell under the federal framework for swaps and futures. Conflicting appeals court decisions could eventually push the issue to the US Supreme Court. New Jersey has another week, until September 3, to ask the high court to review its case, and the most recent Nevada ruling increases the pressure for a nationwide resolution. The CFTC itself has been pushing back against some states’ regulatory efforts, arguing that prediction markets fall under its purview. At the same time, several states, such as Connecticut, Kentucky, New Mexico, etc., have moved against Kalshi, arguing that contracts based on sports events are essentially gambling. The row comes as prediction markets spread beyond politics and financial events. Kalshi also has contracts based on economic data, weather and entertainment.