States can regulate prediction markets as gambling, federal appeals court rules

A federal appeals court ruled Friday that states can regulate prediction markets like gambling, dealing a major blow to the booming industry .

There are still related lawsuits pending across the country, and legal experts believe the matter will ultimately be settled by the Supreme Court. But Friday's ruling from the Ninth Circuit Court of Appeals is the largest courtroom victory to date for the states as they seek to regulate prediction sites.

The 3-0 ruling came from a panel of three Trump-appointed judges. The case originated from Nevada, where regulators tried to shut down the Kalshi prediction site.

On prediction sites like Kalshi and Polymarket, users can wager on nearly everything, from sports to culture, award shows, album releases, the weather, the value of gold, and beyond.

With the backing of the Trump administration, prediction markets have been operating as federally regulated financial exchanges. They get licenses from the Commodity Futures Trading Commission to offer "event contracts, which is a type of derivative swap.

But a staggering 44 states have argued that these platforms are, in fact, gambling and should be subjected to state gaming laws and taxes.

"The substance of the sports event contracts offered on Kalshi's (exchange) is sports gambling, regardless of whether Kalshi calls them swaps," the appeals panel wrote Friday, adding that "Kalshi's attempts to distinguish its sports event contracts from sportsbooks betting are unpersuasive."

The judges also said it was "disingenuous" for Kalshi to argue in court that its products weren't sports-betting when it previously used that phrasing in marketing materials .

CNN has a partnership with Kalshi and uses its data to cover some major events, but editorial employees aren't allowed to use prediction sites.

Kalshi condemned the ruling Friday and said it would pursue appeals.

"Despite the Ninth Circuit's opinion, we still believe the CFTC regulations as written do not prohibit sports contracts, and in any event, the CFTC is working to clarify those regulations," Kalshi spokeswoman Dani Lever said in a statement. "We will be seeking further review."

The case came after Nevada regulators tried to crack down on Kalshi and other prediction sites operated by Crypto.com and Robinhood.

Nevada Gov. Joe Lombardo, a Republican, said in a statement that the ruling would help "safeguard the integrity of our gaming industry."

Mike Dreitzer, chair of the Nevada Gaming Control Board, said in a statement: "This completely vindicates what we have been saying all along."