The battle over who gets to regulate prediction markets just took a major turn. The Ninth Circuit Court of Appeals ruled against Kalshi, Crypto.com, and Robinhood, denying their requests for injunctive relief against the Nevada Gaming Control Board. The court concluded that sports-related event contracts are not derivatives regulated by the federal government—a decision that directly contradicts an earlier ruling from the Third Circuit and makes a Supreme Court fight all but inevitable.
At the center of the dispute is a straightforward but contentious question: Are sports event contracts swaps, as the Commodity Futures Trading Commission (CFTC) argues, or are they simply sports betting, as 44 states contend?
The platforms, backed by the CFTC, argue that all event contracts—regardless of the underlying subject—are swaps, a type of derivative that falls under the CFTC’s exclusive jurisdiction. The agency has even sued nine states to defend what it believes is its sole authority to regulate these markets.
But the Ninth Circuit disagreed, writing in its opinion that “the sports event contracts were not ‘swaps’ because they were sports bets.” That reasoning was enough to reject the platforms’ requests to stop Nevada from halting their operations, which the state claims are gambling offerings outside its regulatory framework.
A CFTC pushback
The CFTC quickly fired back. A spokesperson told CNBC that the court correctly understood that swaps are exclusively regulated by the commission but erred in deciding that sports-related event contracts don’t fit the definition.
“A derivative contract structured as a swap is a swap regardless of the underlying subject matter—the only exceptions in statute are onions and movie box office receipts,” the spokesperson said. “The Ninth Circuit erred today when it invented a new and atextual exception to the CEA,” referring to the Commodity Exchange Act, the law that spells out which event contracts the CFTC can permit or reject.
Circuit split all but guarantees SCOTUS review
The ruling creates a classic circuit split. In early April, the Third Circuit ruled the opposite way, saying that only the CFTC has jurisdiction to regulate sports-related event contracts. That kind of disagreement between federal appeals courts is often the trigger for Supreme Court review.
“This is a classic circuit split,” said Joshua Mitts, a professor at Columbia Law School. “Ultimately, this is the kind of legal controversy or legal difference of opinion which will make its way to the Supreme Court.”
Robinhood, which also offers event contracts, said it plans to appeal. “Every eligible customer should have access to these markets, which are federally regulated by the CFTC and offered through our CFTC-registered Futures Commission Merchant,” a spokesperson said in a statement.
Kalshi, Crypto.com, and the Nevada Attorney General’s office did not immediately respond to requests for comment.
Sportsbooks rally on the news
The ruling was a boost for traditional sportsbooks. Shares of DraftKings jumped 7%, while Flutter Entertainment—parent company of FanDuel—rose more than 6%. Both companies have seen their stocks pressured over the past year by concerns that prediction markets could disrupt the sports betting industry. In response, they’ve been rushing to launch their own prediction market exchanges.
With the Ninth Circuit now on one side and the Third Circuit on the other, the question of who gets to regulate prediction markets appears headed to the highest court in the land. The stakes are high for the platforms, the states, and the CFTC alike.
Source: www.cnbc.com — https://www.cnbc.com/2026/08/28/appeals-court-rules-against-prediction-markets-tees-up-scotus-fight.html
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