Appeals court ruling affirms state authority over prediction markets, creating a federal court split and legal setback for Kalshi.
Regulation & Gov ·
An appeals court has affirmed state authority over prediction markets in a ruling that creates a legal setback for Kalshi, the CFTC-regulated prediction market and derivatives exchange. The decision deepens an existing split among federal courts on the question of regulatory jurisdiction over event contracts, complicating Kalshi's path to nationwide operations.
The ruling underscores the ongoing tension between federal and state oversight of prediction markets. Kalshi operates as a designated contract market under CFTC supervision, with federal regulators having previously moved to block Arizona's prosecution of the platform by arguing its sports and election contracts qualify as regulated financial swaps under federal law. This latest appellate decision, however, appears to constrain that federal authority and restore room for states to regulate prediction markets within their borders.
The conflicting court decisions leave unresolved which regulatory framework will ultimately govern prediction markets nationwide. Kalshi's ability to operate across state lines and expand its user base remains uncertain pending potential further appeals or legislative action.