An appellate court is expected to rule after hearing arguments over whether prediction market contracts are regulated by federal or state authorities. Kalshi argues its event contracts are “swaps” under the CFTC‘s exclusive jurisdiction. Legal experts speculate the conflict over regulating these platforms, which include Polymarket, could reach the U.S. Supreme Court.
A legal battle over the regulation of prediction market platforms may be destined for the U.S. Supreme Court. This follows recent oral arguments before the U.S. Court of Appeals for the Ninth Circuit between Kalshi and the state of Nevada.
The appeal concerns a lower court decision blocking Kalshi from offering certain event contracts in Nevada. State authorities claim the company requires a gaming license to operate there.
Kalshi’s lawyer, Colleen Sinzdak, noted multiple state enforcement actions against prediction platforms. “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,” she stated.
The company’s central argument is that its contracts are “swaps” falling under the Commodity Futures Trading Commission. CFTC Chair Michael Selig has supported a similar position in a case involving Crypto.com against Nevada.
The appellate court did not issue an immediate ruling following the arguments. Any decision could significantly impact how state courts treat prediction market platforms as the sector grows.
Coinbase chief legal officer Paul Grewal speculated the Supreme Court may ultimately resolve the jurisdictional conflict. “Either way, I stand by my longstanding prediction— the Supreme Court will resolve whether sports [contracts] on [Designated Contract Markets] are swaps subject to the exclusive jurisdiction of the CFTC,” he said.
