Federal Appeals Court Rules Kalshi Sports Prediction Markets Are Subject to State Gambling Laws
A federal court rejects Kalshi's claim that event contracts are CFTC-regulated financial swaps, ruling states can enforce gaming and sports betting regulations.
A federal appeals court has dealt a major legal setback to prediction market operator Kalshi, ruling that sports event contracts hosted on its platform cannot evade state gambling regulations simply by labeling trades as financial swaps.
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Kalshi had argued that its CFTC-regulated status preempted state gaming commissions from restricting trading activity. However, the court held that binary outcome contracts based on sports results constitute sports wagering under state legal definitions.
The ruling creates regulatory friction for emerging prediction market platforms that had relied on federal commodities oversight to bypass state-by-state gaming licensing requirements.