- Key takeaway: The U.S. Court of Appeals for the 9th Circuit ruled that Nevada can block the use of event contracts on sporting events, dealing a blow to Kalshi and setting up a split with the 3rd U.S. Circuit Court of Appeals in Philadelphia.
- Expert quote: "The only question is whether the justices take the case this fall or wait until next year for final rulings. We give the [Commodity Futures Trading Commission] the edge, though it is a close call." —Jaret Seiberg, managing director at TD Cowen.
- What's at stake: Until a higher court rules on the issue, the availability of sports event contracts will vary depending on the rulings of individual appellate courts.
WASHINGTON — A ruling by a U.S. appeals court makes it increasingly likely that the Supreme Court will be compelled to decide who has authority over prediction markets. The main question is when.
On Aug. 28, the 9th U.S. Circuit Court of Appeals ruled that Nevada can block the use of event contracts on sporting events, dealing a blow to defendant prediction marketplace Kalshi and setting up a split with the 3rd U.S. Circuit Court of Appeals, which held that New Jersey cannot regulate Kalshi's platform.
The Commodity Futures Trading Commission and states that have historically regulated sports gambling are at odds over who has the ultimate authority to regulate prediction-market platforms. The CFTC continues to
Other states, including
Prediction market operators such as Kalshi and Polymarket have grown rapidly in recent years, both in terms of total users and total volume of trades. Trading volume on prediction market platforms increased from
Analysts say the split between the two appeals courts increases the likelihood that the Supreme Court will eventually take up one of the lawsuits, potentially resolving which regulators have authority over prediction-market derivatives.
In a Monday note, Jaret Seiberg, an analyst at TD Cowen, said the latest ruling "ensure[s] the Supreme Court decides the future of event contracts for sports."
"The only question is whether the justices take the case this fall or wait until next year for final rulings," he wrote. "We give the CFTC the edge though it is a close call."
How quickly one of the lawsuits reaches the Supreme Court, however, remains an open question.
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Ian Katz, managing director of Capital Alpha Partners, wrote in a Monday note that because the 9th and 3rd Circuit decisions stemmed from preliminary injunctions, the Supreme Court could "pass and wait for a case that has been through more of the legal process."
"Our best guess is that SCOTUS takes up the issue in 2027," Katz wrote.
The legal developments come as banks have yet to formally enter the prediction-markets space, although major players such as
For banks,
Until a higher court rules on the issue, the availability of sports event contracts will vary depending on the rulings of individual appeals courts.
"It means there will be some regions of the country where it is permissible and some regions where it is not," Seiberg said.
