Prediction Markets Face New Legal Setback as Court Upholds State Authority Over Kalshi

Federal Courts Clash Over Prediction Markets After Kalshi Ruling

The Ninth Circuit Court of Appeals on Tuesday affirmed a lower court’s decision that state regulators retain jurisdiction over prediction markets, delivering a decisive blow to Kalshi, the first U.S. exchange cleared by the CFTC to offer binary event contracts. Legal analysts say the opinion creates a fissure between federal and state authority that could force the Reuters to report a pending Supreme Court petition. While the ruling protects state gambling commissions, it also threatens the growth trajectory of regulated markets that have attracted ↑ $150 million in venture funding this year.

“This decision underscores the fragmented regulatory environment surrounding prediction markets,” noted a senior counsel at a major law firm.

The split may compel the nation’s highest court to resolve whether federal securities law preempts state gambling statutes, a question that has lingered since the CFTC’s 2022 clearance of Kalshi’s platform. Stakeholders are watching closely, as the outcome could reshape the financial ecosystem for event‑based trading.

Words by Victor Hale (Equities & Market Dynamics Analyst).