Ninth Circuit Prediction Markets Ruling: What It Changes

A federal appeals court has ruled that states retain authority to regulate prediction market platforms under their gambling laws, rejecting the argument that federal commodities regulation preempts state gaming statutes. The Ninth Circuit prediction markets ruling is the most consequential legal development yet in a fight that has run through more than a dozen states since 2025.

Quick answer: The Ninth Circuit held that Kalshi did not show a likelihood that the Commodity Exchange Act preempts state gaming regulation of sports event contracts. The practical effect is that states can pursue enforcement against prediction market platforms offering sports contracts, weakening the industry's core legal argument without resolving the question nationally.

The Argument That Just Lost

Prediction market platforms have built their US expansion on a single legal proposition: because they are registered with and regulated by the Commodity Futures Trading Commission, federal law occupies the field and state gambling statutes cannot reach them. Kalshi's chief executive has stated publicly that state law does not really apply to the company.

That argument, if accepted, would make sports event contracts available nationwide regardless of whether a state has legalized sports betting — including in states that have specifically declined to. The Ninth Circuit declined to accept it, finding Kalshi had not demonstrated a likelihood of success on preemption.

This is not a final merits ruling on every question in the dispute, and it does not shut the platforms down. But it removes the presumption the industry has been operating under and shifts leverage decisively toward state regulators.

The State-by-State Picture

Kalshi and Polymarket are both CFTC-regulated and, on the industry's reading, available nationwide. The contested landscape looks very different:

• Minnesota is the only state to have openly banned prediction markets outright, with the ban effective August 1, 2026.
• Arizona pursued criminal charges alleging violations of state gambling and election-betting law. The CFTC countersued, and a federal judge permanently blocked Arizona from proceeding criminally.
• Maryland argues sports event contracts are unlicensed sports bets; a federal judge denied Kalshi's request to block enforcement and the case is on appeal.
• Massachusetts obtained an injunction blocking Kalshi from offering sports event contracts.
• Michigan ordered Kalshi to pause operations.

The pattern is a genuinely fractured legal map, with different federal courts reaching different conclusions on materially similar questions. That divergence is exactly the condition that eventually pushes a question toward the Supreme Court.

Why the Gaming Industry Cares So Much

The American Gaming Association has been direct in targeting unregulated prediction market platforms that function like sportsbooks while bypassing gaming law. The objection is not primarily philosophical.

Licensed sportsbooks pay state licensing fees, pay state gaming taxes that in some jurisdictions exceed 50% of revenue, fund responsible gambling programmes, comply with state advertising rules, and submit to state audits. A platform offering functionally similar products under federal commodities registration carries none of those costs. The competitive asymmetry is substantial, and it is the operators' central complaint.

State treasuries have a parallel concern. Sports betting tax revenue has become a meaningful budget line in most legal states, and volume migrating to federally regulated venues does not generate it.

The Consumer Protection Question

The dimension that gets least attention is what protections apply to users. State-licensed sportsbooks operate under mandated responsible gambling frameworks: deposit limits, self-exclusion registries, advertising restrictions, and requirements to display helpline information.

CFTC-regulated exchanges are built for financial market participants and were not designed around gambling harm. A self-excluded individual barred from every licensed sportsbook in their state may face no equivalent barrier on a prediction market platform. That gap has drawn attention from responsible gambling advocates independent of the commercial dispute, and the CFTC itself has issued warnings about platforms marketing event contracts using moneyline-style odds presentation.

Lobbying and the Legislative Track

The industry is not relying on litigation alone. Kalshi spent $500,000 lobbying federal policymakers on prediction markets in the second quarter of 2026 and retained a new lobbying team focused on legislation governing prediction market regulation.

That signals a recognition that courts may not deliver the outcome the industry needs. A federal statute clarifying the boundary between commodities regulation and state gaming law would resolve the question definitively — in whichever direction Congress chose. Given the competing interests of state governments, tribal gaming operators, commercial casinos and the exchanges themselves, that legislation is unlikely to move quickly.

What This Means for Users

For anyone currently using these platforms, three points are worth understanding. First, availability may change on a state-by-state basis with limited notice as enforcement actions proceed. Second, the consumer protections available differ meaningfully from those at a state-licensed sportsbook. Third, the tax treatment of event contract winnings differs from gambling winnings and is not settled in all respects.

Anyone in a state with legal, regulated sports wagering has an alternative that operates under a well-established consumer protection framework. Our US sports betting hub covers what is legally available by state.

Frequently Asked Questions

Are prediction markets still legal after this ruling?

They remain CFTC-registered and operating, but the ruling confirms states can pursue enforcement under their own gambling laws. Availability is likely to become more state-dependent, not less.

Does this ruling apply nationwide?

The Ninth Circuit's authority covers the western states within its circuit. Other circuits have reached different conclusions, which is why a Supreme Court resolution is increasingly likely.

How are prediction markets different from sportsbooks?

Prediction markets are peer-to-peer exchanges where users trade contracts against each other, with the platform taking a fee. Sportsbooks set odds and take the other side of bets. Functionally, for a sports outcome, the user experience is very similar.

What happens next in the litigation?

Appeals continue in multiple circuits, with Maryland's case already on appeal. The split between circuits makes eventual Supreme Court review a realistic prospect, though no case has yet been accepted.

Bottom Line

The Ninth Circuit has taken the industry's strongest argument off the table in one circuit and given state regulators a template elsewhere. The question is now heading toward either the Supreme Court or Congress, and neither will move fast. Expect a patchwork map and continued enforcement actions in the interim.

For ongoing coverage of gambling regulation and market developments, see our latest articles and gambling guides.