A federal appeals court has ruled in favor of Nevada's ability to enforce its gambling laws against prediction market operator Kalshi, delivering a significant setback for the company and increasing the likelihood of a Supreme Court review ahead of the 2027 NFL season.
On Friday, the US Court of Appeals for the Ninth Circuit made a 3-0 ruling, determining that contracts related to sports events do not fall under the federally regulated swaps notion outlined in the Commodity Exchange Act (CEA). This decision overturned an earlier injunction that had restricted Nevada’s gaming regulators from imposing regulations on these financial products.
In a detailed 50-page opinion, the three-judge panel concluded that Kalshi’s sports event contracts should be classified as "sports gambling", contrasting Kalshi's designation of these contracts as "swaps". US Circuit Judge Ryan Nelson emphasized this point, illustrating that there is no meaningful difference between a wager on the Las Vegas Raiders winning by a specific spread at a sportsbook and a contract on that same outcome at Kalshi. Nelson even referenced a quote from Shakespeare’s "Romeo and Juliet" to highlight the analogy: "To call a rose by any other name would smell as sweet."
Nelson further remarked, "For Kalshi to deny that its sports event contracts are sports bets under a reasonable person’s understanding is disingenuous."
Mike Dreitzer, Chair of the Nevada Gaming Control Board, stated that the ruling "completely vindicates what we have been saying all along: This is sports betting and needs to be properly regulated by the state."
The American Gaming Association (AGA) described this ruling as a victory for consumer protections. The AGA has been vocal in its opposition to prediction market operations, claiming that states have collectively lost over $1 billion in sports betting tax revenue due to prediction markets. AGA President Bill Miller applauded Nevada for protecting its regulated gaming framework, calling the ruling a substantial win for consumers and taxpayers.
In contrast, the US Commodity Futures Trading Commission (CFTC) has asserted its exclusive authority over the regulation of event contracts. CFTC Chair Michael Selig voiced this perspective on CNBC, arguing that state gaming commissions are attempting to nullify federal law. Following New York's significant lawsuit against Kalshi, Selig reiterated the CFTC's commitment to defending its jurisdiction.
The recent Ninth Circuit ruling creates a divide from an earlier decision in the US Court of Appeals for the Third Circuit, which found in favor of Kalshi. In that case, KalshiEX LLC v. Flaherty, the court ruled 2-1 that the CEA takes precedence over New Jersey’s ability to enforce its gambling laws against Kalshi. Major circuit splits often motivate the Supreme Court to review cases of national importance.
Capitol Market has a contract allowing users to wager on whether the Supreme Court will hear the case by December 31. This contract witnessed over $976,000 in trading volume as of Friday, with the likelihood of a "yes" vote rising from 30% to 64% that day. New Jersey has a decision deadline of September 3 on whether to petition the Supreme Court.
Ahead of President Donald Trump’s remarks regarding prediction markets, his son, Donald Trump Jr., spoke about the issue during a Republican Attorneys General Association meeting in March. He suggested that states were misled by the gambling lobby, emphasizing that federal oversight exists over these markets, rather than state attorney generals. Trump Jr.'s comments became known after being reported by the New York Times.
The younger Trump, who received over $300,000 in shares for his role as a strategic advisor for Kalshi, has seen this investment's value increase significantly. He was also linked to Polymarket through an investment by 1789 Capital, where he is a partner. A spokesperson for Trump Jr. clarified that he does not communicate with the federal government on behalf of any companies he advises.
As the NCAA college football season unfolds, over a dozen games kicked off on Thursday, with more matchups scheduled, including an international game in Dublin featuring the University of North Carolina against Texas Christian University. By the end of Labor Day Weekend, all 138 teams in the Football Bowl Subdivision will have played at least one game as Las Vegas prepares to host the college football national championship for the first time in January.
Already, prediction market trading volume for college football has surged to between $20 million and $30 million, reflecting a 22x increase from the previous year. As of Friday, Kalshi’s trading volume for national championship futures surpassed $17.5 million, with Ohio State and Notre Dame each at 13% favorites. Meanwhile, Texas, led by Heisman candidate Arch Manning, is a close third at 12%.
In addition, DraftKings has ramped up its promotional efforts as the college football season begins, launching new ads across populous states like California, Texas, and Florida. They have introduced new combo offerings that mimic traditional sportsbook parlays, achieving a daily volume spike of 277% on Wednesday.
Matt Rybaltowski covers detailed sports betting stories, finance, mergers, and technology developments.
