Sports Market Ruling Raises California Stakes

A federal appeals court decision has strengthened states’ ability to challenge sports prediction markets, raising the stakes for California’s gaming industry and businesses investing in online wagering.

In a unanimous August 28 ruling, the Ninth U.S. Circuit Court of Appeals upheld the dissolution of an injunction that had protected Kalshi from Nevada’s enforcement efforts involving sports contracts. The panel concluded that Kalshi had not demonstrated that federal commodities law likely overrides Nevada’s gambling regulations.

The decision concerns sports-related contracts, rather than every product offered by prediction markets. The court returned questions about election contracts to the district court for further consideration.

Kalshi operates a financial exchange overseen by the Commodity Futures Trading Commission. Customers buy and sell contracts tied to future outcomes. The company argues that federal oversight prevents states from applying their gambling laws to those transactions.

The judges rejected that position at this stage of the litigation, finding that sports contracts function as wagers despite their financial terminology.

“The substance of the sports event contracts offered on Kalshi’s DCM is sports gambling, regardless of whether Kalshi calls them swaps,” the panel wrote.

For California, the ruling carries particular significance because the state falls within the Ninth Circuit. Its published legal conclusions provide binding precedent for federal district courts throughout the circuit, strengthening the position of regulators challenging comparable sports contracts. However, the Nevada decision does not itself order a shutdown in California.

California has not authorized conventional sports wagering. Voters rejected competing legalization measures, Propositions 26 and 27, in November 2022. Consequently, greater enforcement authority would not automatically create a licensed sports-betting industry or generate a new stream of wagering taxes.

Attorney General Rob Bonta has already supported state oversight. In June, his office joined a multistate brief backing Ohio’s enforcement against Kalshi, describing it as California’s seventh participation in nationwide court filings targeting prediction-market companies.

The potential business effects extend beyond the platforms themselves. If California pursues restrictions that withstand further litigation, operators could face reduced customer access, additional compliance costs and pressure to reconsider advertising, sponsorships and distribution agreements.

For tribal gaming businesses, including those serving the Coachella Valley, the decision could strengthen arguments against sports wagering offered outside existing gambling frameworks. Any resulting benefit to casino revenue remains uncertain; the ruling neither authorizes tribal sportsbooks nor establishes that money spent on prediction markets would shift to casinos.

The national dispute is already moving toward possible Supreme Court review. On September 2, New Jersey petitioned the justices to review an April Third Circuit decision favoring Kalshi’s federal-preemption argument. That conflicting appellate outcome creates uncertainty for companies pursuing nationwide expansion.

Kalshi has said it will seek further review of the Nevada decision. The ruling arose from a preliminary-injunction dispute, and further proceedings could affect its practical reach.

For California businesses, the immediate consequence is heightened regulatory uncertainty. Investment plans built around uninterrupted access to sports prediction markets now depend more heavily on enforcement decisions, subsequent court orders and the eventual resolution of the federal-state jurisdiction dispute. Revenue forecasts also face uncertainty.