PHOENIX (AZFamily/AP) — A federal appeals court panel on Friday refused to let prediction market operator Kalshi restart trading on sports and elections events in Nevada while it fights the state’s effort to shut it down until it gets a license from state gambling regulators.
A panel of judges from the 9th U.S. Circuit Court of Appeals in San Francisco ruled that Kalshi didn’t make a persuasive argument that federal commodities trading law preempts Nevada’s state gambling law in determining who should regulate its sporting events business.
“It’s certainly significant when a United States Court of Appeals makes a ruling,” said David Larson, Former Chair of the American Bar Association Section of Dispute Resolution and Professor of Law at the Mitchell Hamline School of Law
It’s a separate, but similar, case to ongoing litigation in Arizona after Arizona Attorney General Kris Mayes filed criminal charges against Kalshi for allegedly operating an illegal gambling business.
The federal judge in that case granted a Temporary Restraining Order in April, at the time saying the CFTC showed enough reason that it has jurisdiction over Kalshi and therefore state gambling laws don’t apply. The judge later granted a Preliminary Injunction.
Kalshi has argued that it is not a betting platform, rather a financial exchange and therefore is regulated by the federal agency Commodity Futures Trading Commission.
Friday’s decision raises the likelihood that the U.S. Supreme Court will eventually settle the question as to whether states can regulate them under their gambling laws after the Philadelphia-based 3rd U.S. Circuit Court of Appeals ruled earlier this year that New Jersey couldn’t regulate Kalshi.
“Now we do have two United States Courts of Appeals saying different things, which, again, is kind of the traditional point at which the Supreme Court will consider taking the case,” said Larson.
In a statement, Kalshi said it will seek further review of the decision. In the meantime, trading on sports, entertainment and elections contracts are blocked in Nevada, Kalshi has said.
This is a significant win for states’ authority to regulate gambling operations. Calling a sports bet a ‘swap’ doesn’t make it one. States like Arizona have built a comprehensive system to regulate gaming and today’s ruling affirms those regulations. Financial reform legislation was never intended to strip states of their traditional police power over gambling, and I’m glad the court said so clearly. Kalshi’s position would have effectively federalized sports betting regulation nationwide and swept aside decades of state and Tribal oversight built to protect consumers from the real harms of unregulated gambling. My office is reviewing today’s opinion closely, including its implications for our own ongoing litigation with Kalshi. I remain committed to enforcing Arizona’s gaming laws and will continue to defend the State’s authority to do.
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