Kalshi Loses Nevada Court Fight as Prediction Markets Battle Over Who Gets to Regulate Them (UPDATED)

Benzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below.

Editor's note: This story has been updated to include a comment from a Kalshi spokesperson.

On Friday, a federal appeals court blocked Kalshi from avoiding Nevada gaming oversight, intensifying a nationwide fight over who regulates the fast-growing prediction markets industry.

Kalshi Faces Regulatory Setback as Courts Clash

The 9th U.S. Circuit Court of Appeals ruled unanimously that Kalshi was unlikely to prove the Commodity Exchange Act overrides Nevada's licensing requirements.

The decision conflicts with an April ruling by the Third Circuit , which blocked New Jersey from regulating Kalshi's platform. New Jersey has until Sept. 3 to appeal that decision.

That circuit split raises the odds the Supreme Court will ultimately settle whether states or the Commodity Futures Trading Commission (CFTC) govern the fast-growing prediction markets sector.

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

Sports Contracts Ruled Gambling, Not Swaps

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

He said the contracts do not qualify as "swaps" under the 2010 Dodd-Frank Act, rejecting the CFTC's claim that it has oversight of them.

He also noted that Kalshi advertised itself as 'the first app for legal sports betting' in all 50 U.S. states.

President Donald Trump appointed all three judges on Friday's panel. Republican presidents also appointed the judges who ruled on the New Jersey case.

In a statement to Benzinga, Kalshi spokesperson Dani Lever said, "The Ninth Circuit agreed with the Third Circuit on a fundamental point: federal law prevents states from regulating trading on a federally licensed exchange, like Kalshi."

Lever added that the company still believes CFTC rules don't prohibit sports contracts and Kalshi "will be seeking further review."

Prediction Markets Gain Momentum Beyond Elections

Prediction markets, including Kalshi, Polymarket , Coinbase Global Inc. (NASDAQ: COIN ) and Gemini Titan (NASDAQ: GEMI ), have grown in popularity after accurately forecasting the 2024 election.

Despite its 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-trading volume to reach $1.1 billion in 2026, an increase of roughly 500% from the previous year.