US states can regulate prediction markets
A U.S. federal appeals court ruled that states can regulate prediction markets as gambling, in a unanimous decision issued by a three-judge panel. The ruling comes at a time of strong tension between these platforms and state regulators, and could sway the discussion on how to legally treat a rapidly expanding format.
The case originated in Nevada, where regulators attempted to prevent Kalshi from operating. According to CNN, related lawsuits are still pending across the country, and several legal experts anticipate that the Supreme Court will ultimately have the final say. In its reasoning, the panel maintained that the essence of the contracts on sporting events offered by the platform is sports betting, regardless of the company calling them swaps, and found its attempts to differentiate these products from the bets offered by traditional sportsbooks unconvincing. The judges even described as disingenuous the company's denial that these were sports bets when it had used that very expression in its own advertising material.
On the company's side, its spokesperson Dani Lever responded that, despite the ruling, the company still believes that the Commodity Futures Trading Commission's regulations do not prohibit sports contracts and that the agency is working to clarify its rules, which is why it will request a new review of the case.
Kalshi is a U.S. prediction market platform, a format where users trade on the outcome of future events. Recently, it has moved closer to the realm of sports betting, which has sparked a regulatory debate over whether it should be treated as a financial instrument or as gambling. The ruling is part of this broader dispute, which affects several platforms and jurisdictions and is growing as prediction markets gain volume in the country.
Tags: Prediction markets in the United States, Kalshi, Sports betting ruling, State gambling regulation