After Kalshi appeal, prediction markets fight could head to US Supreme Court

Some legal experts speculated that the state vs. federal jurisdiction battle over regulating prediction markets companies could soon be headed to the United States Supreme Court.

On Thursday, the US Court of Appeals for the Ninth Circuit heard oral arguments from lawyers representing prediction markets platform Kalshi and Nevada authorities over the state's ban on the prediction markets' event contracts. The appeal was over a lower court decision preventing Kalshi from offering certain event-based contracts in Nevada, based on claims that the company needed a gaming license.

Thursday oral arguments by Kalshi and the State of Nevada. Source: US Court of Appeals, Ninth Circuit

The appellate judge overseeing Thursday’s oral arguments and the lawyer for Kalshi acknowledged that there had been several state-level enforcement actions against the company and other prediction market platforms, including criminal charges filed in Arizona. However, last week a federal court blocked Arizona authorities from enforcing the state’s gambling laws on Kalshi’s event contracts.

“I think the body of case law does demonstrate that what we really need to avoid here is having a state and a federal court considering exactly the same issue at exactly the same time and potentially reaching different outcomes,” said Colleen Sinzdak, representing Kalshi.

Related: CFTC probes oil futures trades tied to Trump's moves in Iran: Report

Central to Kalshi’s argument was that the platform’s event contracts were “swaps” falling under the purview of the Commodity Futures Trading Commission (CFTC) rather than state gaming authorities. CFTC Chair Michael Selig has backed this position in the case of Crypto.com’s prediction markets against Nevada authorities.