Court rules Kalshi sports bets aren't "swaps," just gambling with a different name

The United States Court of Appeals for the Ninth Circuit has ruled that sports-event contracts offered by the prediction platform Kalshi constitute gambling under state law rather than federally protected financial instruments.

The unanimous decision by a three-judge panel allows Nevada gaming authorities to enforce state regulations against Kalshi, decisively rejecting the company's argument that the federal Commodity Exchange Act preempts local authority. Kalshi had contended that its platform should operate under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC), arguing that its sports betting options are legally defined as swaps. However, the court determined that rebranding a sports wager as a financial contract does not change its fundamental nature as gambling.

This decision creates a direct conflict with a prior ruling from the Third Circuit Court of Appeals, which had previously supported prediction markets by classifying similar sports wagers as swaps. This growing disagreement among federal circuit courts increases the likelihood that the United States Supreme Court will eventually take up the issue to establish a uniform standard for online prediction platforms. Although federal regulators have proposed rules more favorable to prediction markets, the Ninth Circuit emphasized that existing regulatory frameworks continue to prohibit gaming contracts. Furthermore, the appellate court remanded the case back to a lower district court to evaluate whether Kalshi's election-related prediction contracts should similarly fall under state-level gambling prohibitions.