In a significant blow to the prediction market industry, the U.S. Court of Appeals for the Ninth Circuit ruled on Friday that state governments maintain the authority to regulate sports wagering under their own local gambling laws. The three judge panel found that federal commodities trading regulations do not override Nevada’s specific statutes regarding bets placed on sporting events. This decision marks a major setback for companies like Kalshi, which have sought to operate these platforms outside the traditional framework of state gaming commissions.
The ruling creates a precarious legal landscape for prediction markets because it directly contradicts previous decisions made in other parts of the country. For instance, the U.S. Court of Appeals for the Third Circuit previously determined that New Jersey lacked the authority to regulate Kalshi’s operations. When different federal circuit courts reach opposite conclusions on the same legal question, it typically signals a growing crisis of consistency within the judicial system that requires higher intervention.
This emerging conflict between regional courts is widely expected to push the matter toward the U.S. Supreme Court for a final resolution. With approximately twenty states currently locked in similar litigation over whether sports related contracts should be treated as financial instruments or gambles, there is immense pressure to establish a single national standard. Until then, operators face a fragmented map where their business model may be perfectly legal in one state but strictly prohibited in another.