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State of Play’s TL;DR
- Nevada can continue to enforce its gambling laws against Kalshi, a federal appeals court has ruled.
- The court rejected Kalshi’s pre-emptive argument.
A federal appeals court has ruled that Nevada can enforce its gambling laws against Kalshi’s sports-event contracts, rejecting the company’s argument that federal commodities law blocks state regulation.
The 9th U.S. Circuit Court of Appeals issued the decision on Aug. 28, siding with Nevada regulators and upholding a lower court ruling from Las Vegas.
The court said the prediction market contracts at issue have “the essential characteristics of sports betting” and do not get the federal protection Kalshi was seeking. It also rejected the argument that Congress intended federal financial-market law to displace states’ traditional authority over gambling.
That gives Nevada regulators more room to pursue enforcement against Kalshi, which the state has accused of offering sports betting without the required license.
Ruling deepens split over prediction market oversight
Kalshi has argued that its event contracts are swaps under the jurisdiction of the US Commodity Futures Trading Commission and that states cannot impose separate gaming rules on a federally regulated exchange.
Nevada, backed by the Nevada Gaming Control Board, argued the products function as sports wagers and fall within state gambling law. Board Chairman Mike Dreitzer said he welcomed the ruling and that the state remains committed to enforcing its gambling laws and protecting consumers.
The decision also drew support from the American Gaming Association, which said state regulation of contracts tied to sports events would strengthen existing consumer protections and gaming frameworks.
The Nevada ruling is especially significant because it conflicts with a separate decision from the 3rd U.S. Circuit Court of Appeals involving New Jersey. In that case, a federal court in April rejected New Jersey’s effort to regulate Kalshi, finding that the company’s sports contracts fell under the federal framework for swaps and futures.
Supreme Court review now looks more plausible
With two federal appellate courts reaching different conclusions, the issue could be headed toward the US Supreme Court. According to the available timeline, New Jersey has until Sept. 3 to ask the high court to review its case.
Kalshi said the legal fight is not over and that it plans to continue seeking judicial review.
The outcome could shape how states handle not only Kalshi, but also other prediction market products tied to sports. Several states – including Connecticut, Kentucky, and New Mexico – have already moved against Kalshi on the view that sports-event contracts are effectively gambling.
Kalshi also offers contracts tied to economic data, weather, and entertainment, but the Nevada case centers on its sports-related offerings.
Based on reporting by Silvia Pavlof for Gambling News.
