Ninth Circuit Rules States Can Regulate Prediction-Market Platforms as Gambling

On Friday, a three-judge panel of the Ninth Circuit Court of Appeals issued a unanimous 3-0 opinion holding that sports-related event contracts offered by prediction-market platforms constitute gambling, not federally regulated swaps. The ruling arose from Nevada’s challenge to the Kalshi platform and also rejected injunctive relief sought by Crypto.com and Robinhood.

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Prediction-market sites such as Kalshi and Polymarket have operated under licenses from the Commodity Futures Trading Commission (CFTC), which classifies all event contracts as derivatives (“swaps”). The CFTC has sued multiple states to defend its exclusive jurisdiction. However, 44 states contend that these contracts are de facto sports bets and should fall under state gaming laws and taxes. Earlier in the year, the Third Circuit Court of Appeals ruled in favor of prediction-market operators, halting New Jersey’s attempt to apply its gaming statutes. The Ninth Circuit’s contrary ruling creates a circuit split, setting the stage for possible Supreme Court review.

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• Weekly trading volume: Kalshi reports “billions of dollars” in weekly activity, driven largely by sports markets.

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• State involvement: 44 states have argued that prediction-market platforms are gambling.

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• Judicial composition: The Ninth Circuit panel consisted of three judges appointed by former President Donald Trump.

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• CFTC position: The agency maintains that it has exclusive authority over all event contracts, a claim the Ninth Circuit rejected.

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• Third Circuit contrast: The earlier Third Circuit ruling affirmed CFTC jurisdiction over sports-related contracts, underscoring the emerging legal divide.

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• “It’s the first ruling against Kalshi at the appellate level, and the opinion seemed to be pretty brutal for the company,” — Dustin Gouker, an independent journalist

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• “If prediction markets are allowed everywhere, and then they basically just become quick access to sports gambling, like there’s your loophole, there’s the back door,” — Rep. Blake Moore

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• “They’re getting lobbied and they feel they need to come out and say, ‘Hey, we’re getting pushed now,'” — Werner Antweiler, an economics professor at the University of British Columbia

Who should regulate prediction markets in Canada?

• “Before additional event contracts are approved, regulators should require clear evidence that they provide meaningful public interest benefits and that robust safeguards are in place to protect retail investors,” — JP Bureaud, the executive director of Fair Canada

Who should regulate prediction markets in Canada?

The Ninth Circuit’s opinion directly opposes the Third Circuit’s earlier determination that only the CFTC may regulate sports-related event contracts. Both appellate courts have issued full opinions, but no Supreme Court decision has yet resolved the split. Additional lawsuits remain pending in other states, leaving the ultimate scope of state versus federal authority unsettled.

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Legal analysts expect the conflict to reach the Supreme Court, as both the Nevada case and New Jersey’s appeal are poised for higher review. The Ninth Circuit’s ruling now serves as binding precedent for federal judges in California, Arizona, and six other states, potentially prompting further state enforcement actions while the Supreme Court’s timetable remains unclear.

CNN