An appellate court is expected to reach a decision after hearing arguments from Kalshi and lawyers representing the state of Nevada.
Legal experts say the dispute over whether states or the federal government regulate prediction markets may reach the U.S. Supreme Court. On Thursday, the U.S. Court of Appeals for the Ninth Circuit heard oral arguments from Kalshi and Nevada authorities over the state’s ban on certain event contracts, appealing a lower court ruling that had prevented Kalshi from offering those contracts in Nevada on the grounds they required a gaming license.
The judge and Kalshi’s lawyer noted several state enforcement actions against the company and other prediction-market platforms, including criminal charges in Arizona. Last week, a federal court blocked Arizona authorities from enforcing the state’s gambling laws against Kalshi’s event contracts.
Kalshi argues its event contracts are “swaps” that fall under the Commodity Futures Trading Commission’s exclusive jurisdiction rather than state gaming regulators. CFTC Chair Michael Selig has supported that view in a related dispute involving Crypto.com’s prediction markets and Nevada. Kalshi’s counsel warned against parallel state and federal proceedings that could reach conflicting outcomes.
The Ninth Circuit did not issue an immediate ruling after oral argument. Any decision could shape how state courts treat platforms such as Kalshi and Polymarket as policymakers and regulators respond to a market that some estimate could reach $1 trillion by 2030.
Coinbase chief legal officer Paul Grewal, whose firm is not a party to the Kalshi case but has an interest in the broader prediction-markets issue, suggested the case might ultimately be resolved by the Supreme Court. Grewal noted oral-argument questions are not a reliable indicator of a court’s view and reiterated his long-held prediction that the Supreme Court will decide whether sports contracts on designated contract markets are swaps under the CFTC’s exclusive jurisdiction.
The U.S. Supreme Court previously affirmed in Murphy v. NCAA (2018) that states have authority to regulate sports gambling, a precedent that may influence—but not settle—the competing state and federal claims in these prediction-market cases.
Cointelegraph is committed to independent, transparent journalism. This article follows Cointelegraph’s Editorial Policy; readers are encouraged to verify information independently. Read the Editorial Policy at https://cointelegraph.com/editorial-policy