- Published on
Court rules Kalshi sports bets aren't 'swaps,' just gambling with a different name
- Authors
- Name
- DeepHorus
A federal appeals court has ruled against prediction market platform Kalshi, finding that its sports bets are effectively gambling and must comply with state laws. The unanimous decision from the U.S. Court of Appeals for the 9th Circuit allows Nevada to enforce its gaming regulations against the company. This ruling directly challenges the platform's claim to operate as a federally regulated financial market rather than a sportsbook.
The case stems from a cease-and-desist letter sent by the Nevada Gaming Control Board to Kalshi. The board asserted that the company was violating state statutes by offering sports-event contracts without a license. Kalshi argued its products were "swaps" under the federal Commodity Exchange Act (CEA), placing them under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC) and beyond state control.
Judge Ryan Nelson, writing for the court, noted that Kalshi advertises itself as "the first app for legal sports betting in all 50 states." The judges concluded the volume of activity on its platform demonstrates its true nature as a gambling operation. They affirmed a lower court order that permits Nevada to apply its gaming laws to the company's sports-related contracts.
The ruling creates a significant legal conflict with a prior decision from the 3rd Circuit Court. That earlier case, involving New Jersey, found that similar sports wagers on prediction markets do qualify as federally regulated swaps. This circuit split increases the likelihood the U.S. Supreme Court will eventually need to settle the question.
Nevada officials hailed the decision. Governor Joe Lombardo stated that prediction markets offering sports contracts "constitute gambling and must comply with Nevada’s gaming laws." The Gaming Control Board said the court "emphatically rejected" the argument that federal law preempts state regulation in this arena.
The decision complicates the future for prediction markets and their attempts to expand sports betting nationally. It challenges the core legal model that platforms like Kalshi, Crypto.com, and Robinhood have pursued to avoid patchwork state gambling regulations. The industry now faces the prospect of state-by-state licensing battles.
This outcome stands in contrast to efforts by the Trump administration, which has sought to help prediction markets avoid state-level oversight. The 9th Circuit's firm stance, delivered by three Trump-appointed judges, signals judicial skepticism toward the industry's legal claims. The conflict between circuit courts ensures this debate over the definition of a sports bet is far from over.
