States can regulate sports prediction markets as gambling, federal appeals court rules

A federal appeals court ruled that states can regulate sports wagers offered through prediction markets, stating that the substance of the defendant’s sports event contracts is sports gambling. 

In an Aug. 28 unanimous ruling, the U.S. Court of Appeals for the Ninth Circuit upheld a November 2025 decision by U.S. District Judge Andrew Gordon allowing Nevada gaming regulators to oversee sports contracts offered by prediction market Kalshi. The company argued that its federally regulated status shielded the contracts from the state’s gambling laws.

Kalshi, which allows users to wager on the outcomes of sporting events, argued that the contracts are financial products regulated exclusively by the federal Commodity Futures Trading Commission (CFTC) under the Commodity Exchange Act.

The Ninth Circuit rejected that argument, concluding that Kalshi’s sports event contracts do not qualify as federally regulated “swaps.”

“The substance of the sports event contracts offered on Kalshi’s DCM [Designated Contract Market] is sports gambling, regardless of whether Kalshi calls them swaps,” Judge Ryan Nelson wrote for the court.

The other two judges on the panel were Kenneth Kiyul Lee, who wrote a concurring opinion, and Bridget Bade. President Donald Trump appointed all three judges.

Kalshi spokesperson Dani Lever told The Hill that the company plans to seek “further review.” 

"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," Lever said.

According to the Hill, the dispute stems from a lawsuit brought by the Nevada Gaming Control Board earlier in 2026 against Kalshi, which alleged the platform is engaged in illegal and unlicensed gambling.

Nevada Gaming Control Board Chairman Mike Dreitzer welcomed the ruling in an Aug. 28 statement.

“This completely vindicates what we have been saying all along. This is sports betting and needs to be properly regulated by the state,” Dreitzer said. “The Nevada Gaming Control Board has been regulating gaming in the state of Nevada for more than 70 years in accordance with the highest standards and best practices. We will continue to vigorously enforce Nevada law to safeguard gaming in our state.”

The decision deepens a growing legal split over whether prediction markets can offer sports wagering nationwide without complying with state gambling laws. The Third Circuit Court of Appeals notably sided with Kalshi in its dispute with New Jersey in April, finding that the company had shown a reasonable likelihood of succeeding on its argument that federal law preempts the state’s effort to regulate the contracts. 

New Jersey Attorney General Jennifer Davenport asked the U.S. Supreme Court Sept. 2 to resolve the disagreement between the appeals courts. 

Davenport argued in a press release that companies like Kalshi “have no right to offer their sports bets without following state law” and urged the high court “to resolve this issue and recognize that Congress did not silently make the sports-betting industry immune from state law.” 

Davenport’s office said that 95% of Kalshi’s revenue in 2025 came from sports betting and that 44 states and hundreds of casinos have opposed the company’s argument that its sports contracts are exempt from state gambling laws. 

Meanwhile, similar disputes have spread across the country, with Davenport’s office reporting that litigation involving prediction markets is active in about twenty states.