Ninth Circuit Rejects Kalshi and Crypto.com Injunctions, Setting Up Supreme Court Battle Over Prediction Markets

The U.S. Court of Appeals for the Ninth Circuit has denied emergency injunctive relief to prediction market platforms Kalshi, Crypto.com, and Robinhood, siding with Nevada gaming authorities who maintain that sports-focused event contracts represent unregulated gambling rather than federally protected financial instruments.

The ruling upholds enforcement measures by the Nevada Gaming Control Board against the trading platforms. A coalition of 44 states has taken the position that sports-based event contracts function identically to traditional sports wagering. Conversely, the platforms and their primary regulator, the Commodity Futures Trading Commission (CFTC), maintain that all event contracts are financial swaps governed exclusively by federal derivatives legislation.

To protect its jurisdiction over event contracts, the CFTC has engaged in litigation against nine individual state regulatory bodies. However, the Ninth Circuit explicitly rejected the federal agency's stance, stating in its opinion against Kalshi that the sports contracts were not financial swaps because they constituted sports bets, as first reported by CNBC Business.

The Ninth Circuit's determination creates a direct conflict with an earlier decision rendered by the Third Circuit Court of Appeals in early April. In that prior matter, the Third Circuit concluded that sole regulatory jurisdiction over sports-related event contracts belongs to the CFTC, establishing an explicit divide between federal circuit courts.

Legal scholars note that the conflicting appellate decisions significantly increase the likelihood of review by the nation's highest court. Columbia Law School professor Joshua Mitts told CNBC Business that the disagreement represents a classic circuit split, adding that the legal controversy over regulatory authority between state gaming commissions and the CFTC will ultimately require resolution by the Supreme Court.

Representatives for Kalshi, Crypto.com, Robinhood, the CFTC, and the Nevada Attorney General's office did not immediately respond to requests for comment following the decision.

Shares of publicly traded sportsbook operators DraftKings and Flutter Entertainment—the parent company of FanDuel—gained following the court's announcement. Both companies have experienced market pressure over the past year due to competitive threats from prediction markets and have moved to establish their own proprietary event contract exchanges.