The Ninth Circuit recently heard arguments in an appeal from prediction-market platform Kalshi and the state of Nevada over a state ban on certain event contracts. The dispute centers on whether those contracts require a state gaming license or instead are regulated as “swaps” exclusively by the Commodity Futures Trading Commission (CFTC).
A lower court had blocked Kalshi from offering the disputed contracts in Nevada on the grounds they fell under state gaming laws. Kalshi argues the contracts are swaps subject to federal oversight by the CFTC, and its lawyers warned the court against parallel state and federal proceedings that could produce contradictory results.
Judges and counsel discussed several enforcement actions brought by states against Kalshi and other prediction-market platforms, including criminal charges filed in Arizona. In a related development, a federal court recently barred Arizona authorities from applying state gambling laws to Kalshi’s event contracts.
CFTC Chair Michael Selig has expressed support for the view that these products fall under the agency’s jurisdiction in similar disputes, and Kalshi’s legal position aligns with that interpretation. Observers say how the Ninth Circuit rules could strongly influence how states treat platforms such as Kalshi and Polymarket, and how regulators and lawmakers respond as the sector grows. Some estimates place the prediction-markets industry as large as $1 trillion by 2030.
Although the Ninth Circuit gave no immediate decision after oral argument, legal experts—including Coinbase’s chief legal officer Paul Grewal, who is watching the issue—expect the clash over federal and state authority may ultimately reach the U.S. Supreme Court. Grewal cautioned that questions asked at oral argument are not a reliable indicator of the court’s direction, and he reiterated his view that the Supreme Court may have to decide whether certain contracts on designated contract markets are swaps within the CFTC’s exclusive jurisdiction.
Past Supreme Court precedent, such as Murphy v. NCAA (2018), confirmed state power to regulate sports gambling, a ruling that could inform but not definitively resolve the federal-versus-state jurisdictional battle in these prediction-market cases. The Ninth Circuit’s forthcoming decision could set important precedent for how prediction markets are regulated nationwide.