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The Ninth Circuit Court of Appeals has handed states a major victory in their push to regulate prediction markets as gambling.
In a unanimous 3‑0 ruling issued Friday, the panel of Trump‑appointed judges upheld Nevada regulators’ attempt to shut down Kalshi, rejecting the company’s claim that its contracts should be treated as federally regulated financial instruments.
The decision marks the strongest courtroom win yet for states, which argue that platforms like Kalshi and Polymarket fall under gaming laws and should be taxed accordingly.
The judges were clear in their assessment of Kalshi’s defense. “The substance of the sports event contracts offered on Kalshi’s (exchange) is sports gambling, regardless of whether Kalshi calls them swaps,” the panel wrote, adding that “Kalshi’s attempts to distinguish its sports event contracts from sportsbooks betting are unpersuasive.”
They also criticized the company’s shifting language, saying it was “disingenuous” to argue in court that its products weren’t sports betting when its own marketing had previously used that phrasing, CNN reports.
“We will be seeking further review,” Kalshi replies
Prediction markets have operated in the U.S. with backing from the Commodity Futures Trading Commission, which licenses them to offer event contracts as derivative swaps.
Users can wager on outcomes ranging from sports and entertainment to financial indicators and even the weather. But 44 states have argued that these platforms are gambling businesses in disguise.
Following the ruling, Kalshi quickly condemned the Ninth Circuit’s decision and made clear it will continue to fight.
Company spokeswoman Dani Lever said in a statement, “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. We will be seeking further review.”
The case began after Nevada regulators moved against Kalshi and other prediction platforms tied to Crypto.com and Robinhood, arguing that their products amounted to gambling under state law.
Nevada officials welcomed the ruling. Governor Joe Lombardo said the decision would help “safeguard the integrity of our gaming industry.” Mike Dreitzer, chair of the Nevada Gaming Control Board, added that “This completely vindicates what we have been saying all along.”
Supreme Court set to be the final decider
Friday’s ruling from the Ninth Circuit has created a direct split among federal appeals courts, setting the stage for the Supreme Court to weigh in.
Earlier this year, the Third Circuit sided with prediction platforms and blocked New Jersey’s attempt to apply its gaming laws, while Nevada regulators won their case against Kalshi. Lawyers for New Jersey have already said they plan to take their fight to the Supreme Court, and legal observers believe the issue is now almost certain to reach the nation’s highest court.
The Ninth Circuit’s decision now stands as binding precedent across western states, including California and Arizona, giving regulators in those jurisdictions more power to shut down prediction platforms
Meanwhile, traders on Polymarket reacted quickly, with odds of Supreme Court review jumping from 29% to 52% after the ruling, and nearly $1 million traded on the market.
Still, the same market put the chance of the Court taking the case before October 31 at only 6 percent, showing that while review looks likely, the timing remains uncertain.
