A federal appeals court has handed Nevada a victory in its legal fight with prediction market operator Kalshi, permitting the state to enforce gambling laws against the company’s sports event contracts.
A three-judge panel of the Ninth Circuit Court of Appeals rejected Kalshi’s attempt to resume offering sports-related contracts in Nevada. Kalshi argues that it operates as a federally regulated derivatives exchange under the Commodity Futures Trading Commission and should therefore fall outside state gambling regulation.
The court disagreed, finding that commodities law is unlikely to pre-empt Nevada’s authority over Kalshi’s sports event contracts. Hence, this ruling means Kalshi is unable to offer sports, entertainment and election-related contracts to users in Nevada during the case.
Nevada Attorney General Aaron Ford’s office described the decision as an affirmation of the state’s authority over gaming. The state argues that sports betting does not stop being gambling simply because it is structured as an event contract.
Compliance dispute adds pressure over Kalshi’s Nevada operations
Kalshi and Nevada regulators are fighting over whether the company complied with an earlier court order. The Nevada Gaming Control Board said investigators were still able to purchase event contracts from inside the state after Kalshi was ordered to halt sports, election and entertainment markets.
Regulators argue that the company should face penalties of up to $120,000 per day for alleged non-compliance. Kalshi rejected those claims and said investigators deliberately attempted to bypass its geolocation controls. The company said it deployed a GeoComply-powered geofencing system and took steps to prevent Nevada users from accessing restricted markets.
The dispute highlights the challenge facing prediction market platforms as states enforce local gambling laws while operators argue federal regulation should take priority. Although the Ninth Circuit ruled against Kalshi on sports contracts, it sent questions involving election-related contracts back to a lower court. Kalshi has said it intends to seek further review.
State regulators intensify pressure on sports prediction contracts
Nevada’s case is part of a national fight over how prediction markets should be regulated. Around 20 states are involved in disputes concerning platforms including Kalshi, Polymarket and Robinhood.
Regulators argue that sports event contracts resemble unlicensed sports betting products and should be subject to legislation. Connecticut recently filed a lawsuit seeking to block Kalshi’s sports contracts, arguing they amount to illegal sports wagering.
Washington has adopted a stricter approach, requiring Kalshi to geofence sports, politics and entertainment markets. Nevada lawmakers have also introduced the bipartisan Prediction Markets Are Gambling Act.
The proposal would prohibit federally regulated exchanges from offering sports betting-style contracts while allowing prediction markets linked to financial, economic and weather events.
Conflicting circuit rulings increase likelihood of Supreme Court review
The Ninth Circuit decision creates a conflict with a ruling from the Third Circuit Court of Appeals. This court previously found that New Jersey could not regulate Kalshi under state gambling laws.
The competing decisions leave prediction market operators facing different legal standards depending on jurisdiction. They also increase the possibility that the US Supreme Court may need to decide whether federally regulated event contracts can be restricted by state gambling authorities.
Kalshi and platforms argue that event contracts are financial instruments governed by federal commodities law. States counter that when those contracts are tied to sporting outcomes, they operate like conventional wagers and should sit inside gambling frameworks.
Until a higher court or Congress resolves this conflict, prediction markets will likely be caught between federal regulation and state enforcement.
The Ninth Circuit ruling strengthens the argument that sports event contracts can still fall within state laws even when offered through a federally regulated exchange. As different federal circuits reach unique conclusions, the pressure for a Supreme Court decision is getting higher.
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