the U.S. Court of Appeals for the Ninth Circuit in San Francisco recently examined multiple appellate cases regarding such markets. This legal scrutiny, focusing on Nevada’s litigation against Kalshi and similar cases, took place on April 16, 2026. The outcomes of these cases are anticipated to address complex issues surrounding federal preemption and state gaming laws, which could significantly impact the future landscape of prediction markets and sports wagering in the United States.
The hearings are part of a broader legal challenge occurring across various jurisdictions. Courts are debating whether contracts based on sports events, akin to prediction markets, are legally distinct from traditional sports wagers. The significance lies in whether these contracts contravene state laws governing sports betting, a point of contention that has prompted varied judicial interpretations. Notably, the Third Circuit previously upheld a preliminary injunction in favor of Kalshi, preventing New Jersey from banning its contracts. Should the Ninth Circuit oppose this view, it would create a judicial split, possibly prompting the U.S. Supreme Court to intervene.
The legal dispute arises amidst a downturn in Nevada’s sports wagering, with the state’s Super Bowl handle falling to a decade low of $133.8 million, marking an 11% drop from 2025. Analysts attribute part of this decline to the growing presence of prediction markets like Kalshi, Robinhood, and Crypto.com. Nevada argues that these markets violate state law by categorizing sports event contracts as equivalent to illegal wagers.
During the Ninth Circuit’s session, the panel, including U.S. Circuit Judge Ryan Nelson, engaged in heated discussions with representatives from these platforms. Shay Dvoretzky, representing Crypto.com, contended that the Commodity Exchange Act grants the Commodity Futures Trading Commission (CFTC) exclusive regulatory authority over these contracts, thus preempting state law. However, Judge Nelson expressed skepticism about distinguishing these contracts from sports wagers conducted by traditional sportsbooks like Caesars.
The CFTC’s involvement in the case, supporting prediction markets through an amicus brief, underscores the regulatory complexities at play. The federal agency’s stance suggests a national regulatory framework may supersede state laws, a view contested by Nevada.
The potential for the Supreme Court to address these conflicts has been a focal point in industry discussions. Former New Jersey Governor Chris Christie and legal experts like Josh Sterling, representing Kalshi, have speculated that the Supreme Court might step in if the circuit courts remain divided. Such a decision could clarify whether sports event contracts are regulated derivatives under the Commodity Exchange Act and if federal jurisdiction prevails over state gambling prohibitions.
Platforms like Polymarket are even facilitating trades on whether the Supreme Court will grant certiorari to the case, reflecting market interest in the legal proceedings’ outcomes. Current odds suggest a near 39% chance of the Supreme Court hearing the case by the end of the year, highlighting the uncertainty surrounding the legal trajectory.
The Ninth Circuit’s imminent ruling, expected within 60 to 120 days, will be pivotal. Should it contrast with the Third Circuit’s decision, it would establish a clear path for Supreme Court review. Legal analysts from firms like Katten Muchin Rosenman LLP and Holland & Knight project that a petition for certiorari could be filed by early 2027, potentially leading to a Supreme Court decision during its October 2027 term.
This timeline is crucial, as a Supreme Court ruling could influence the presidential election cycle in 2028. The forthcoming decision by the Ninth Circuit will not only affect the legality of prediction markets but also the broader regulatory framework governing sports betting and financial trades related to sports events across the United States.
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