Ninth Circuit Rules Kalshi’s Sports Contracts Are Betting

It appears that the U.S. Supreme Court (SCOTUS) will soon hear the case over sports prediction markets.

The US Court of Appeals for the Ninth Circuit has ruled in favor of the Nevada Gaming Control Board in its legal battle with Kalshi. The court found that the sports contracts are a form of betting instead of “swaps,” which means they are subject to state gambling laws, regulations, and taxes.

In the ruling, the judges highlighted Kalshi’s argument that its sports markets are protected as “swaps” under the Commodity Exchange Act. Based on the operator’s interpretation of the law, the court questioned why wagers using online sportsbooks would also be covered.

“If the CEA’s definition of swap is read broadly to encompass Kalshi’s sports event contracts, as Kalshi urges, then it can also be read to encompass other sports bets such that anyone who places an off-DCM sports bet that fits within § 1a(47)(A)(ii)’s definition of a swap would be violating the CEA,” the ruling reads. “If there is not a difference under the CEA’s swap definition between sports betting on Kalshi and sports betting in Caesar’s Sportsbook, then every person placing a sports bet at Caesar’s Sportsbook (or anywhere else for that matter) is violating the CEA.”

Battle Finally Heads to SCOTUS

While dozens of lawsuits are currently working their way through the US court system, Nevada’s is set to become the first to reach SCOTUS. Given the mixed rulings the battle over the emerging industry has seen, the nation’s highest court will have a chance to have the final say.

If and when SCOTUS delivers a ruling, it will decide two questions that are being fought over across the US.

The first is whether sports contracts are a form of betting or federally protected “swaps.” This has been at the core of the fight over the controversial offering, so that a ruling would resolve many pending lawsuits.

The second question is whether the Commodity Exchange Act preempts state gambling laws. If SCOTUS finds it doesn’t, then it wouldn’t matter whether or not sports contracts are defined as swaps.