States can regulate prediction markets, Ninth Circuit says

• The Ninth Circuit Court of Appeals ruled on Friday that Nevada can enforce its gaming laws against Kalshi’s sports event contracts.
• The unanimous 3-0 decision affirms a lower court ruling and directly conflicts with the Third Circuit’s stance on Kalshi in a New Jersey case.
• Kalshi says it will seek further review, with legal observers expecting the dispute to ultimately reach the Supreme Court.

A federal appeals court has ruled that Nevada regulators can treat Kalshi’s sports event contracts as gambling, dealing a significant setback to the prediction markets sector, CNN reported on Friday.

The Ninth Circuit Court of Appeals issued the unanimous decision on August 28, backing the Nevada Gaming Control Board’s authority to enforce its state gaming laws against the platform.

A costly precedent

Nevada Gaming Control Board Chairman Mike Dreitzer wasted no time celebrating the outcome.

Dreitzer said:

“This completely vindicates what we have been saying all along. This is sports betting and needs to be properly regulated by the state.”

The panel affirmed a decision by US District Judge Andrew Gordon dissolving a preliminary injunction that had shielded Kalshi from Nevada’s gaming laws. Judges found the platform’s sports event contracts function as sports bets rather than federally regulated swaps.

The ruling directly contradicts an April decision from the Third Circuit Court of Appeals, which sided with Kalshi in a challenge brought by New Jersey regulators.

That split between circuits raises the odds that the US Supreme Court will eventually decide who has jurisdiction over sports event contracts, and it hands other states a precedent to point to in the meantime.

States gain momentum

Kalshi has faced a wave of state-level challenges this year. Connecticut recently filed a civil suit against the platform, joining states including Washington state, where a court ordered Kalshi to geofence its market by September 2 or face fines of $120,000 a day.

Some operators are already adjusting their products under the pressure. Sports exchange Novig recently scrapped its sportsbook-style odds for percentage-based pricing, a move that pushes its presentation closer to a financial market than a betting app, echoing the same odds format the CFTC has separately flagged as misleading.

Others are moving in the opposite direction: DraftKings has been running an aggressive marketing blitz in California for its Predictions product, betting that expansion can outpace the legal risk.

Nevada Governor Joe Lombardo also praised the decision, saying it would help safeguard the integrity of the state’s gaming industry.

Supreme Court endgame

The Commodity Futures Trading Commission has consistently argued it holds exclusive jurisdiction over event contracts, even as it separately pushes the industry on consumer-facing practices, telling platforms this month to drop sportsbook-style odds.

Traditional sportsbook operators, meanwhile, are lobbying for aligned federal rules to replace the current state-by-state patchwork.

Kalshi spokeswoman Dani Lever said the company intends to keep fighting the ruling. Lever said:

“Despite the Ninth Circuit’s opinion, we still believe the CFTC regulations as written do not prohibit sports contracts, and in any event, the CFTC is working to clarify those regulations. We will be seeking further review.”

With a circuit split now firmly in place, the industry’s biggest players are watching two tracks at once: the slow climb toward a Supreme Court hearing, and the faster, state-by-state fight that Friday’s ruling has just made easier for regulators to win.