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Nevada, Ohio, and a bipartisan coalition of 37 states, plus the District of Columbia, have urged the U.S. Court of Appeals for the Fourth Circuit to reject claims that federal financial-market rules provide a workaround for prediction-market operators to offer sports betting nationwide outside state gaming laws.
In an amicus (“friend of the court”) brief filed Dec. 22 in KalshiEx LLC v. Martin, the states argue that Congress did not clearly strip states of their long-standing “police power” authority to regulate gambling and protect consumers, and that federal derivatives oversight was never designed to replace state sports wagering frameworks.
Nevada Attorney General Aaron D. Ford, who is co-leading the filing with Ohio Attorney General Dave Yost, framed the case as a boundary fight between gaming regulation and financial regulation.
“Nevada is the foundational home of sports wagering, and states, not federal financial regulators, have decades of experience protecting consumers, preserving the integrity of sporting events, and addressing real-world harms such as underage gambling,” Ford said.
States are asking the Fourth Circuit to bar ‘sports events contracts’
At the center of the appeal is whether a federally regulated event-contracts platform can list “sports event contracts” (structured like yes/no outcome contracts) in a way that, in practice, functions like sports wagering, while bypassing state licensing, state tax regimes, and state responsible-gambling requirements.
The states’ brief warns that accepting Kalshi’s theory would weaken or effectively sideline state oversight in a category that states have traditionally controlled, and could leave sports betting “largely unregulated” at scale.
Maryland officials are the respondents in the case, and the coalition brief supports Maryland’s ability to enforce its gambling laws against sports-related event contracts offered to residents.
More states are moving against “prediction market” sports products
The states continue to argue that the relevant federal framework for derivatives markets was not written to quietly override state gaming regimes, and that treating it as such would create a regulatory gap. As such, sports betting products could expand without the licensing checks and consumer-protection guardrails that states have built over years of regulated wagering.
The Kalshi appeal is landing in a climate where multiple jurisdictions are escalating scrutiny of sports-related prediction products.
In Connecticut, regulators issued cease-and-desist orders this month to Kalshi, Robinhood Derivatives, and Crypto.com, arguing only licensed entities may offer sports wagering in the state and raising concerns about under-21 access and other state-law conflicts.
Meanwhile, federal regulators have also signaled discomfort with how quickly sports event contracts can resemble consumer betting at retail scale. In February, Robinhood said it rolled back Super Bowl-related event contracts after receiving a request from the U.S. Commodity Futures Trading Commission (CFTC), and a CFTC spokesperson told Reuters the agency had “serious concerns” about customers being offered access to contracts that may not be permissible.
Industry groups ask Fourth Circuit to protect state primacy over sports betting
If prediction-market distribution remains contested, brands considering integrations, promotional relationships, or media partnerships around “event contracts” may need to treat the category as a compliance and reputation risk, especially in states where sports wagering is tightly controlled and politically sensitive.
For now, the coalition is still pressing the Fourth Circuit to keep the basic structure intact: states license and police sports betting, while federal market oversight stays focused on its original remit, supervising derivatives markets, not replacing state gaming control.
Source: 2 News
