US Appeals Court Rules Nevada Can Regulate Kalshi's Sports Prediction Markets

A U.S. federal appeals court ruled that prediction market operator Kalshi is not entitled to an injunction to block Nevada from overseeing its platform, a key decision that strengthens state-level authority over event-based contracts. The ruling sets up a direct conflict with another federal court, increasing the likelihood of a Supreme Court showdown over who regulates the burgeoning industry.

Nevada's Authority Upheld

In a unanimous 3-0 decision on Friday, the 9th U.S. Circuit Court of Appeals in San Francisco determined that the federal Commodity Exchange Act likely does not preempt Nevada's state gaming regulations as applied to Kalshi's sports event contracts. The ruling effectively allows the Nevada Gaming Control Board to proceed with its oversight of Kalshi's activities within the state.

This decision is a significant victory for state regulators who argue that many prediction market contracts, particularly those on events like sports, fall under their traditional purview of gaming and wagering.

A Deepening Jurisdictional Divide

The 9th Circuit's finding creates a "circuit split," placing it in direct opposition to an April ruling from the 3rd U.S. Circuit Court of Appeals. In a similar case, the Philadelphia-based court found that New Jersey could not regulate Kalshi's platform, giving precedence to federal oversight.

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This legal conflict means that the regulatory framework for prediction markets could differ significantly depending on the region. Such splits between federal appellate courts are often a primary reason for the U.S. Supreme Court to take up a case in order to establish a uniform national standard.

Implications for the Prediction Market Industry

The central issue is whether prediction markets should be regulated by the U.S. Commodity Futures Trading Commission (CFTC) as financial instruments or by individual state gaming commissions. Friday's ruling adds significant weight to the argument for state-level control.

This ongoing legal uncertainty presents a major challenge for the fast-growing prediction markets industry, which requires clear regulatory guidelines to operate and expand. According to the report from Reuters, Kalshi, the Nevada Gaming Control Board, and the CFTC did not immediately respond to requests for comment.