Three judges appointed by President Trump just delivered a major legal blow to prediction markets like Kalshi and Polymarket — rejecting the very industry the Trump administration has been actively defending as federally regulated financial exchanges rather than gambling.
According to CNN, the Ninth Circuit Court of Appeals ruled unanimously Friday that Nevada regulators can treat sports-related prediction contracts as gambling subject to state oversight, rejecting Kalshi and Crypto.com’s bid to block the state from shutting down their operations. The 3-0 panel found sports event contracts don’t qualify as federally regulated derivatives, directly contradicting the position the platforms and the Commodity Futures Trading Commission have pushed under Trump’s watch.
Independent journalist Dustin Gouker, who covers the prediction market industry, called the decision a stinging first for Kalshi at the appellate level.
“It’s the first ruling against Kalshi at the appellate level, and the opinion seemed to be pretty brutal for the company,” Gouker said.
The ruling directly clashes with an April decision from the Third Circuit, which sided with prediction markets in a similar fight against New Jersey, concluding that all such event contracts qualify as swaps under exclusive federal jurisdiction. That split between two federal appeals courts, one populated in part by Trump’s own appointees ruling against the industry’s federal-preemption argument, all but guarantees the fight now heads to the Supreme Court.
For now, it’s a major rebuke to Trump, whose regulators have taken a hardline stance that prediction markets are not gambling and that states have no jurisdiction to regulate them as gambling. Trump’s eldest son, Donald Trump Jr., serves as an adviser to Kalshi and Polymarket.
Nevada was among several states, including Michigan and Washington, that have already successfully moved to shut down some or all of Kalshi’s operations within their borders. New York has also sued Kalshi directly, alleging it’s running an illegal gambling operation, while the CFTC has fought back in court arguing that letting individual states enforce gambling laws against federally regulated platforms risks destabilizing the entire market nationwide.
Meanwhile, Wisconsin officials recently put out an advisory to voters that they cannot legally place prediction market bets on elections they are voting in, a law that Kalshi strongly opposes.
Shares of traditional sportsbooks DraftKings and Flutter Entertainment, the parent of FanDuel, ticked up following the ruling. Representatives for Kalshi did not immediately respond to requests for comment.
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