US court backs state authority to regulate prediction markets

A federal appeals court has sided with states seeking to regulate prediction markets, dealing a setback to Kalshi, a platform offering event-based trading contracts. The ruling underscores the fragmented legal landscape surrounding prediction markets in the United States, with different circuit courts reaching divergent conclusions on the matter.

The decision reinforces the authority of states to impose their own regulatory frameworks on prediction market operators, rather than leaving oversight exclusively to federal agencies. This outcome contrasts with other judicial interpretations that have suggested federal regulators hold primary jurisdiction over such platforms.

The conflicting appellate rulings have created legal uncertainty for the prediction market industry and raised questions about the scope of state versus federal regulatory power. Industry observers note that the disparity between courts has increased the likelihood of Supreme Court intervention to establish a definitive legal standard.

Prediction markets, which allow users to trade contracts tied to future events, have attracted growing attention from both regulators and investors. The regulatory debate centers on whether these platforms constitute securities, derivatives, or gambling products—distinctions that determine which authorities maintain jurisdiction.

As courts continue to grapple with the regulatory classification of prediction markets, the industry faces ongoing uncertainty over its operational parameters across different US jurisdictions.