Kalshi Loses in Federal Appeals Court, Escalating Battle Over Prediction Market Regulation

A federal appeals court on Friday blocked Kalshi's attempt to circumvent Nevada's gambling regulations, intensifying a nationwide fight over who has the authority to regulate the rapidly growing prediction market industry.

Kalshi Faces Regulatory Setback Amid Conflicting Court Rulings

The U.S. Ninth Circuit Court of Appeals ruled unanimously that Kalshi is unlikely to prove the Commodity Exchange Act preempts Nevada's licensing requirements.

The ruling conflicts with an April decision by the Third Circuit Court of Appeals, which blocked New Jersey from regulating the Kalshi platform. New Jersey has until September 3 to appeal that ruling.

This split among circuit courts increases the likelihood that the Supreme Court will ultimately decide whether states or the Commodity Futures Trading Commission have jurisdiction over this fast-growing industry.

Nevada, Massachusetts, Michigan, and Washington have already obtained court orders restricting Kalshi's operations.

Sports Contracts Ruled as Gambling, Not Swaps

Circuit Judge Ryan Nelson wrote that Kalshi's sports contracts closely resemble sports betting, describing them as "a quintessential form of gambling."

He stated that these contracts do not meet the definition of "swaps" under the 2010 Dodd-Frank Act, rejecting the CFTC's claim of regulatory authority over them.

He also noted that Kalshi had marketed itself as the "first legal sports betting app" in all 50 states.

All three judges presiding over Friday's panel were appointed by President Donald Trump. The judges who ruled on the New Jersey case were also appointed by Republican presidents.

Kalshi did not immediately respond to a request for comment.

Prediction Markets Gain Momentum Beyond Elections

Prediction markets, including Kalshi, Polymarket, Coinbase Global Inc., and Gemini Titan, have surged in popularity after accurately predicting the 2024 election.

Despite the legal setbacks, Kalshi's business continues to grow.

Earlier this month, the company partnered with The Weather Company, operator of Weather.com and The Weather Channel app, and expects weather-related trading volume to reach $1.1 billion in 2026, up roughly 500% from the prior year.