Prediction markets just got a sharp reminder that states still call a lot of the shots. A federal appeals court on Friday ruled that states can treat sites like Polymarket and Kalshi as gambling operations, not just quirky financial exchanges, marking the most significant legal win yet for state regulators, per CNN. The unanimous decision by the 9th US Circuit Court of Appeals, issued by three Trump-appointed judges in a case out of Nevada, found that Kalshi's sports contracts amount to "sports gambling," regardless of how the company labels them.
The ruling clashes with a decision from the 3rd US Circuit Court of Appeals earlier this year that went the other way, setting up a likely Supreme Court fight over whether these markets fall under federal derivatives rules or state gaming laws. Forty-four states have argued that the platforms should be taxed and regulated like casinos and sportsbooks. The latest decision is now binding in Western states, including California and Arizona, potentially opening the door to more shutdown attempts.
"Major victory for Nevada," the office of that state's attorney general said after the ruling, per the AP. "We will be seeking further review," says a spokesperson for Kalshi, which handles billions in weekly trading, per CNN. Polymarket, another major player that wasn't part of the case, is also keeping tabs as the legal stakes rise alongside the bets.
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