The Ninth Circuit Court of Appeals has delivered a landmark ruling that sports prediction market contracts are, in legal terms, straightforward sports bets.
A unanimous three-judge panel ruled that KalshiEX’s sports event contracts do not qualify as “swaps” under the Commodity Exchange Act, stripping the platform of federal protections it had relied upon.
The ruling means Nevada can apply its state gaming laws to Kalshi’s operations, a significant blow to the fast-growing prediction markets industry.
Judge Nelson, writing for the panel, invoked Shakespeare to make the court’s position unmistakably clear, ruling that “placing sports bets, even when called by another name, is still gambling.”
The court’s reasoning was pointed: dressing up a wager as an “event contract” does not change the fundamental nature of the transaction, no matter how sophisticated the financial framing.
The panel also leaned on the major-questions doctrine, finding that Congress does not hide a national takeover of sports betting regulation in “oblique or elliptical language” buried within federal commodities law.
The ruling stands in direct conflict with a Third Circuit Court of Appeals decision from April, which permitted Kalshi to continue operating in New Jersey while its appeal proceeds on the basis that federal law likely preempts state regulation.
That contradiction between the two circuits creates a formal circuit split, which legal experts widely expect to become the basis for a Supreme Court petition in the near future.
The Ninth Circuit’s jurisdiction includes California, the largest state market in the country and one where traditional sports wagering remains illegal despite a flourishing prediction contract business.
Platforms including Kalshi, Polymarket, and DraftKings Predictions have all built substantial user bases in California, operating in a legal grey area that this ruling now significantly darkens.
The decision does not immediately resolve the broader national picture, as related lawsuits remain pending across multiple jurisdictions with varying outcomes still expected.
Legal observers broadly agree the patchwork of conflicting rulings makes Supreme Court intervention not just likely but arguably necessary to establish a uniform national standard.
For the prediction markets industry, which has grown rapidly by positioning itself as distinct from traditional gambling, the ruling represents a serious regulatory and commercial threat.
Kalshi had argued its contracts function more like financial instruments than bets, providing participants with exposure to real-world outcomes in a structured, exchange-traded format.
The Ninth Circuit rejected that framing decisively, reinforcing the view that regulators and courts will scrutinise the economic substance of a product rather than the label its creators choose to attach to it.