Federal Appeals Court Rules Kalshi Sports Contracts Are Gambling, Not Financial Swaps

The U.S. Court of Appeals has ruled against prediction market platform Kalshi, determining that its sports event contracts are subject to state gaming laws rather than federal financial swap regulations.

In a major blow to prediction market operators, the U.S. Court of Appeals ruled that sports-related event contracts offered by Kalshi constitute state-regulated gambling rather than federally protected financial swaps.

Kalshi had argued that its event contracts fell exclusively under the regulatory jurisdiction of the Commodity Futures Trading Commission (CFTC), granting national preemption over state gaming commissions. However, the appellate panel rejected this characterization, emphasizing that underlying sports outcomes lack traditional commercial hedging utility.

The ruling limits prediction market expansion across key U.S. jurisdictions, requiring platforms to obtain individual state gaming licenses before offering sports event contracts.