Business, Finance & Tech
Court Says States Can Regulate Prediction Markets as Gambling
A federal appeals court ruled Friday that states can regulate prediction markets like gambling, dealing a major blow to the rapidly growing industry.
There are still related lawsuits pending across the country, and legal experts believe the matter could ultimately reach the Supreme Court. Friday’s ruling from the Ninth Circuit Court of Appeals is the biggest courtroom victory so far for states seeking to regulate prediction sites.
The 3-0 ruling came from a panel of three Trump-appointed judges. The case originated in Nevada, where regulators attempted to shut down the Kalshi prediction site.
Prediction markets such as Kalshi and Polymarket allow users to wager on a wide range of outcomes, including sports, entertainment, award shows, album releases, weather and financial markets.
With backing from the Trump administration, prediction markets have been operating as federally regulated financial exchanges. They receive licenses from the Commodity Futures Trading Commission to offer “event contracts,” which are a type of derivative swap.
But 44 states have argued that these platforms are actually gambling operations and should be subject to state gaming laws and taxes.
“The substance of the sports event contracts offered on Kalshi’s (exchange) is sports gambling, regardless of whether Kalshi calls them swaps,” the appeals panel wrote Friday, adding that Kalshi’s efforts to distinguish its sports contracts from traditional sportsbook wagers were unpersuasive.
The judges also called it “disingenuous” for Kalshi to argue in court that its products were not sports betting after the company had used similar language in marketing materials.
CNN has a partnership with Kalshi and uses its data to cover some major events, but editorial employees are not allowed to use prediction sites.
Kalshi vows appeals
Kalshi condemned the ruling Friday and said it would continue its legal challenge.
“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,” Kalshi spokeswoman Dani Lever said in a statement. “We will be seeking further review.”
The case began after Nevada regulators moved against Kalshi and prediction markets operated by Crypto.com and Robinhood.
Nevada Gov. Joe Lombardo, a Republican, said the ruling would help “safeguard the integrity of our gaming industry.”
Mike Dreitzer, chair of the Nevada Gaming Control Board, said the decision “completely vindicates” the state’s position.
A looming Supreme Court fight?
Friday’s decision creates a split among federal appeals courts, with conflicting rulings on whether states can regulate prediction markets.
Earlier this year, the Third Circuit Court of Appeals sided with prediction sites and blocked New Jersey’s attempt to apply state gambling laws to the companies. Lawyers for New Jersey have said they plan to take that case to the Supreme Court.
Dustin Gouker, an independent journalist who covers the prediction market industry, said the Ninth Circuit ruling moves the issue closer to a potential Supreme Court case over sports event contracts.
The Nevada ruling could also give other states more authority to attempt to shut down or regulate Kalshi. The Ninth Circuit’s decision is binding precedent for federal judges in California, Arizona and six other states that have sought greater regulation.
Prediction markets have grown rapidly this year, with Kalshi now reporting billions of dollars in weekly trading volume, much of it coming from sports markets.
Polymarket, which was not part of the Nevada lawsuit, is the second-largest prediction site in the United States. CNN has reached out to the company for comment.
By: CNN Newsource
August 28, 2026
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