Business & Finance
Federal appeals court rules states can regulate sports event prediction markets, creating circuit split
The Ninth Circuit refused to block Nevada's regulatory enforcement against prediction platforms, contradicting an earlier federal court ruling and increasing the likelihood of Supreme Court review.
The short version
- A Ninth Circuit panel ruled that federal commodities law does not preempt Nevada from regulating sports-related event contracts as gambling.
- The decision denies injunctive relief to prediction market platforms including Kalshi, Crypto.com, and Robinhood, leaving sports and election contracts blocked in Nevada.
- The ruling directly conflicts with an April decision by the Third Circuit Court of Appeals, establishing a circuit split over whether the Commodity Futures Trading Commission has exclusive jurisdiction.
- Kalshi and Robinhood stated they intend to seek further legal review, with legal experts expecting the dispute to reach the U.S. Supreme Court.
Key facts
- A three-judge panel of the 9th U.S. Circuit Court of Appeals refused to grant preliminary injunctive relief to Kalshi, Crypto.com, and Robinhood against the Nevada Gaming Control Board.[CNBC · Associated Press]
- The Ninth Circuit panel concluded that sports-related event contracts are sports bets rather than federally regulated swaps, sending questions regarding election contracts back to a lower court.[CNBC · Associated Press]
- The decision creates a federal circuit split with the 3rd U.S. Circuit Court of Appeals, which ruled in April that only the Commodity Futures Trading Commission has jurisdiction over sports-related event contracts.[CNBC]
- A Commodity Futures Trading Commission spokesperson stated that the Ninth Circuit erred by creating an unwritten exception to the Commodity Exchange Act, maintaining that all swap-structured derivatives fall under exclusive agency jurisdiction.[CNBC]
- Roughly 20 states are currently involved in litigation over prediction markets.[Associated Press]
- Shares of sportsbook operators DraftKings and Flutter Entertainment rose over 7% and 6% respectively following the ruling.[CNBC]
What remains uncertain
- Whether the U.S. Supreme Court will agree to hear the case to resolve the circuit split between the Ninth and Third Circuits.[CNBC · Associated Press]
- How the lower court will rule on Nevada's challenges regarding Kalshi's election-related contracts following the Ninth Circuit's remand.[Associated Press]