Daily News 19

Tag: Sports event contracts

  • Another Appeals Court Rules Against Kalshi, Finds Sports Contracts Subject to State Regulations

    Another Appeals Court Rules Against Kalshi, Finds Sports Contracts Subject to State Regulations

    Key Highlights

    • A federal appeals court ruled that Kalshi’s sports-event contracts are not federally regulated swaps, rejecting the prediction market’s argument that they fall under Commodity Futures Trading Commission jurisdiction.
    • The three-judge panel agreed Kalshi had standing to sue but determined its contracts do not depend on events “associated with a potential financial, economic, or commercial consequence” as required by statute.
    • The decision intensifies the regulatory clash between states and federally regulated prediction markets over taxation, age restrictions (18 vs. 21), and market competition since the 2024 election.

    Appeals Court Rejects Kalshi’s Swap Classification for Sports Contracts

    A three-judge federal appeals panel delivered a significant setback to prediction market operator Kalshi on Friday, ruling that its sports-event contracts do not qualify as federally regulated swaps under the Commodity Exchange Act. The decision marks a pivotal moment in the escalating regulatory battle between state gambling regulators and federally overseen prediction markets that have surged in prominence following the 2024 presidential election.

    Core Legal Dispute Centers on Statutory Definition

    The court acknowledged that Kalshi had legal standing to bring its case, but parted ways with the platform on the central statutory interpretation. In its written opinion, the panel stated: “While we agree with Kalshi that its sports-event contracts are conditioned on the occurrence of ‘event[s],’ we conclude that Kalshi’s contracts do not depend on events that are ‘associated with a potential financial, economic, or commercial consequence’ within the meaning of the statute.” This distinction effectively removes Kalshi’s sports offerings from the protective umbrella of federal derivatives regulation, leaving them exposed to state-level gambling enforcement.

    New York Giants Example Illustrates Judicial Reasoning

    To clarify its reasoning, the ruling employed a concrete illustration involving the New York Giants. The court explained that the classification hinges on how the “event” is defined. If the event is defined as the Giants winning a Super Bowl, then that outcome would be described as “that event having occurred.” However, the panel determined that such a sporting outcome lacks the requisite financial, economic, or commercial consequence necessary to transform the contract into a regulated swap.

    Why This Matters

    The ruling arrives amid intensifying friction between state gambling authorities and prediction markets like Kalshi, PredictIt, and Polymarket. Since the 2024 election cycle drove unprecedented volume and public attention to these platforms, states have moved aggressively to bring them under local regulatory frameworks. State regulators argue that prediction markets offer functionally identical products to licensed sportsbooks—wagering on game outcomes—yet enjoy structural advantages: they avoid state gaming taxes, operate under lighter compliance burdens, and in many cases accept customers as young as 18, whereas state-licensed operators universally enforce a 21-year-old minimum. Friday’s decision strengthens states’ hand by confirming that, at least for sports-event contracts, federal derivatives law does not preempt their authority. The case is likely to accelerate legislative and enforcement efforts in multiple states seeking to either tax, restrict, or ban these markets outright.

    Frequently Asked Questions

    What specific products did the court rule on?

    The ruling addresses Kalshi’s sports-event contracts—derivative-style instruments that pay out based on the outcomes of sporting events such as the Super Bowl. It does not directly address the platform’s political, economic, or weather-related contracts.

    Does this mean Kalshi must shut down its sports markets immediately?

    The decision removes the federal regulatory shield Kalshi claimed for these products. While not an injunction, it clears the path for state regulators to pursue enforcement actions, cease-and-desist orders, or litigation to halt the offering of sports contracts within their jurisdictions.

    How does the age restriction difference affect the regulatory fight?

    State gambling laws uniformly set the minimum betting age at 21. Kalshi and some other prediction platforms have allowed users as young as 18. States cite this discrepancy as a consumer-protection concern and a competitive inequity, arguing that younger adults are being exposed to gambling-like products without the safeguards required of licensed operators.

  • “This Seems Incorrect”: Ripple CTO Emeritus Slams Kalshi’s CFTC Argument

    “This Seems Incorrect”: Ripple CTO Emeritus Slams Kalshi’s CFTC Argument

    A new legal and regulatory debate is emerging over whether U.S. states or the Commodity Futures Trading Commission (CFTC) should oversee the rapidly expanding prediction markets industry. The dispute follows a federal appeals court ruling that Kalshi cannot prevent Nevada gaming regulators from supervising its platform.

    Kalshi and the CFTC maintain that sports event contracts qualify as “swaps” under the 2010 Dodd-Frank financial reforms, giving the agency authority to oversee them through its regulation of national swaps markets.

    David Schwartz, Ripple’s CTO emeritus, responded to an X post by sports betting and gaming attorney Daniel Wallach. Wallach argued that the CFTC’s rulemaking was effectively “dead on arrival” under the major-questions doctrine, which restricts federal agencies from asserting broad powers without clear authorization from Congress.

    Schwartz challenged that reasoning, saying the central issue is whether Congress delegated authority to regulate gambling conducted through exchange-traded contracts.

    “This seems to be incorrect to me. The question is only whether Congress delegated the power to regulate gambling through exchange-traded contracts. As Kalshi correctly points out, traditional sportsbook gambling is very different,” Schwartz wrote.

    This seems to be incorrect to me. The question is only whether Congress delegated the power to regulate gambling through exchange traded contracts. As Kalshi correctly points out, traditional sportsbook gambling is very different. https://t.co/EY6MKlq1Mx
    — David ‘JoelKatz’ Schwartz (@JoelKatz) August 28, 2026

    Elaborating on his position, Schwartz stated: “Of course Congress didn’t intend to replace state-regulated sportsbook gambling with exchange-traded products outside of state regulation. It meant to create a new, uniform federal framework for creating exchange-traded products outside of state regulation.”

    How the Kalshi prediction markets case began

    The legal battle started in March 2025, when the Nevada Gaming Control Board issued Kalshi a cease-and-desist letter. The regulator alleged that the company’s sports event contracts amounted to an unlicensed sports pool under Nevada gaming law.

    Kalshi countered that the CFTC’s authority over swaps preempted Nevada’s gambling regulations.

    On Friday, the 9th U.S. Circuit Court of Appeals in San Francisco upheld Nevada’s authority to regulate Kalshi’s prediction market activities. Circuit Judge Ryan Nelson said the contracts bear the characteristics of sports betting, “a quintessential form of gambling” that falls outside the CFTC’s regulatory jurisdiction.

    “The CFTC is not a national gambling regulator,” Nelson said, adding that “it is difficult, then, to conclude that Congress intended to ​upend its decades of careful regulation ​of gambling based on broad definitions of the words used in a Wall Street Reform Bill.”

  • Ninth Circuit Ruling Clears Way for Nevada to Enforce Gambling Rules on Kalshi

    Ninth Circuit Ruling Clears Way for Nevada to Enforce Gambling Rules on Kalshi

    Ninth Circuit Allows Nevada to Enforce Gambling Rules Against Kalshi

    The U.S. Court of Appeals for the Ninth Circuit has ruled against prediction market platform Kalshi in a dispute over whether state or federal authorities have the power to regulate sports event contracts.

    In a unanimous 3-0 decision, the court allowed Nevada gambling regulators to enforce state rules against Kalshi. The ruling reverses a lower court’s preliminary injunction, which had temporarily blocked Nevada from taking enforcement action.

    Why the Ninth Circuit Ruled Against Kalshi

    Kalshi operates a federally regulated exchange for event contracts. The company argued that the Commodity Exchange Act (CEA) preempts Nevada’s gambling regulations and sought to prevent the state from treating its sports event contracts as unlawful gambling.

    The Ninth Circuit concluded that Kalshi had not shown that the CEA explicitly preempts state gambling laws, which the court identified as a key requirement for its preemption claim.

    The decision clarifies the relationship between federal commodities regulation and state gambling oversight. Although the Commodity Futures Trading Commission (CFTC) supervises Kalshi’s exchange, states generally retain the authority to enforce their own gambling laws unless Congress has clearly indicated otherwise.

    What the Ruling Means for Kalshi

    The ruling does not determine whether Kalshi’s sports contracts are ultimately legal in Nevada. However, it removes the legal barrier that had prevented state regulators from pursuing enforcement action.

    Kalshi may seek further appeals, but Nevada can now proceed with its case. The company has not been shut down nationwide, and the decision does not resolve the final merits of the state’s claims.

    Potential Impact on Prediction Markets

    The case highlights the growing tension between innovative financial products and traditional state gambling laws. Prediction markets allow users to speculate on the outcomes of events, including elections and sports games. Their rising popularity has also exposed them to a patchwork of state regulations.

    The Ninth Circuit’s decision could influence how other states regulate similar platforms. Businesses operating in the prediction market sector may face increased pressure to comply with state gambling laws even when they operate under federal oversight.

    Legal experts have indicated that the ruling could encourage additional states to assert jurisdiction over prediction market operators. That could contribute to a more fragmented regulatory environment across the United States.

    Investors and users should be aware that the legal status of prediction markets can vary by state. The decision creates particular uncertainty in jurisdictions with strict gambling laws, even though it does not prohibit Kalshi from operating nationwide.

    Frequently Asked Questions

    What did the Ninth Circuit decide in the Kalshi case?

    The court ruled that Kalshi failed to show that the Commodity Exchange Act preempts Nevada’s gambling rules governing sports event contracts. As a result, Nevada can enforce its regulations while the case proceeds.

    Does the ruling ban Kalshi from operating in Nevada?

    No. The decision does not ban Kalshi outright. It allows Nevada regulators to pursue enforcement action, while the final outcome will depend on further proceedings in the lower courts.

    How could the decision affect other prediction markets?

    The ruling may encourage other states to assert jurisdiction over similar platforms, potentially resulting in greater state-level regulation of prediction markets.

    Source: cryptonews.net