Kalshi takes legal blow in court ruling confirming state powers over prediction markets
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The legal pressure is ratcheting up on Kalshi and the broader U.S. prediction market industry after a significant federal court rejection of the company's argument that the state of Nevada had no right to regulate its betting activity.
Key facts
The Ninth Circuit has now teed up a circuit split that calls out for resolution by the Supreme Court," said CFTC spokesman Zach Fulton in an email, accusing the judges of misreading the law
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," said Dani Lever, a Kalshi
The Ninth Circuit erred today when it invented a new and atextual exception to the CEA
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," Lever said
Summary
A federal appeals court in Nevada issued a major setback to Kalshi's legal campaign to reject the enforcement of state gaming regulators, rejecting its argument that the company's federal regulator should have the only say. This is the second major federal court ruling, though, and they've gone in opposite directions, leaving a legal rift in the matter. The panel of judges from the U.S. Court of Appeals for the Ninth Circuit issued a unanimous decision on Friday, disagreeing with Kalshi's argument that Nevada regulators don't have a role in overseeing its business, which is conducted on a platform regulated by the Commodity Futures Trading Commission and the law that underpins it, the Commodity Exchange Act.