Indian Gaming and Prediction Markets: Circuit Split Raises the Stakes
A legal dispute over whether prediction market 'event contracts' are federally regulated derivatives or state-regulated gambling has reached a circuit split. The Third Circuit ruled in favor of the platform Kalshi, while the Ninth Circuit ruled against it, prompting a likely Supreme Court intervention.
Why it matters
The outcome will determine the regulatory future of prediction markets and whether they can bypass state-level gambling laws.
We have previously examined the rapid growth of prediction markets and burgeoning litigation . The basic dispute is straightforward: Prediction-market operators say their “event contracts” are federally regulated derivatives; states, Tribes and commercial casinos disagree, contending these contracts are simply sports bets by another name, and are subject to the same regulations as other forms of gaming.
The difference matters. If the Commodity Exchange Act (CEA), as amended by the 2010 Dodd-Frank Act, gives the Commodity Futures Trading Commission (CFTC) exclusive authority over event contracts, then prediction markets could avoid regulation under state, Tribal and other federal law.
Three developments have now brought that disagreement into sharp focus: The Third Circuit accepted the position offered by prediction market platform Kalshi, the Ninth Circuit rejected that same position, and parties on both sides have asked the U.S. Supreme Court to intervene.
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