States can regulate prediction market platforms as a form of gambling, the 9th Circuit Court of Appeals ruled Friday, opening the door for state-by-state regulation of companies like Kalshi.
The ruling from a three-judge panel of Trump appointees upends the status quo for prediction market sites that had, up until this week, been only subject to federal regulations.
“The substance of the sports event contracts offered on Kalshi’s DCM is sports gambling, regardless of whether Kalshi calls them swaps,” the ruling reads. “Just as ‘that which we call a rose by any other name would smell as sweet,’ ... placing sports bets, even when called by another name, is still gambling.”
Prediction markets like Kalshi allow users to place wagers on the outcome of a wide array of events, and have long maintained they are legally distinct from gambling and are solely subject to regulation by the Commodity Futures Trading Commission. The company is expected to appeal the ruling.
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“The Ninth Circuit agreed with the Third Circuit on a fundamental point: federal law prevents states from regulating trading on a federally licensed exchange, like Kalshi,” Kalshi spokesperson Dani Lever said in a statement. “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.”
Under the Trump administration, the CFTC sued a handful of states seeking to regulate prediction markets, actively supporting Kalshi as it faced lawsuits from states’ attorneys general.
Friday’s ruling came after regulators in Nevada sued to challenge the CFTC’s view that only it could regulate the companies.
“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, a Republican from Utah, where gambling is banned, told NOTUS in an interview before the ruling. “I could not be more of a die-hard supporter of my governor and my attorney general for keeping this at bay and making sure that the legal elements take place to allow Utah to control its own destiny.”
This story was updated to reflect a comment from Kalshi.
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