Nevada Gains Power to Regulate Sports Prediction Markets

The Ninth Circuit Court of Appeals ruled on August 28 that sports-related event contracts offered by prediction-market platforms are not swaps under federal commodities law, clearing the way for Nevada to apply its own gaming regulations to those products. The decision, detailed in ReadWrite’s earlier coverage of the case, denied requests for injunctive relief from Kalshi, Crypto.com, and Robinhood.

All three platforms had asked the court to stop the Nevada Gaming Control Board from shutting down their sports-outcome contract offerings in the state. The court’s finding, according to Insider Monkey’s report via Yahoo Finance, was that these contracts function as sports bets rather than federally regulated swaps, putting them squarely within reach of state gambling law.

The classification question sits at the center of a wider fight. Prediction-market operators and the CFTC have argued that event contracts, including sports-outcome products, qualify as swaps subject to exclusive federal jurisdiction, which would bar states from regulating or banning them outright. Forty-four states have pushed back, arguing the products are sports betting dressed up in derivatives language, a dispute tribal leaders have also raised with Congress.

Platforms like Kalshi have used the federal-swap designation to offer sports-outcome betting in states where traditional sportsbooks remain restricted or banned. That workaround has been a genuine competitive threat: DraftKings and Flutter have faced sustained valuation pressure over the past year, with analysts citing prediction markets’ rapid growth as a headwind, a trend also visible in recent NFL betting-growth data.

Shares of both companies jumped after the ruling. DraftKings gained as much as 10% and Flutter rose as much as 8% on August 28, per Insider Monkey’s figures. The move came despite institutional investors having already pulled back: DraftKings’ hedge fund ownership fell from 61 funds in the first quarter to 54 in the second, while Flutter’s dropped more sharply, from 57 to 37 over the same stretch.

A Bernstein research note cited by Intellectia.AI adds context to how unsettled the legal picture remains. The note points to a separate 2-1 Third Circuit ruling in Flaherty v. KalshiEX that treated sports event contracts as swaps, and says New Jersey has since asked the Supreme Court to review that decision – a filing that arrived five days after the Ninth Circuit’s contrary ruling. Bernstein’s analysts described the near-term outcome as more likely to be a regulatory patchwork than a clean, nationwide resolution.

Kalshi filed a petition for rehearing on September 9, and a Supreme Court review remains possible, both developments Insider Monkey flags as the key markers for whether this ruling holds. The court’s opinion itself, filed in KalshiEX, LLC v. Assad, is available from the Ninth Circuit for anyone tracking the underlying legal reasoning.

None of this settles the jurisdictional question nationally. The ruling applies to one circuit’s reasoning on one set of Nevada-related claims, and prediction-market operators have both the incentive and the legal resources to keep contesting it. Insider Monkey’s own read is that a single-day stock rally proves little on its own – a sustained institutional bid in DraftKings and Flutter, rather than a one-time price pop, would be the stronger signal that the competitive landscape has actually shifted.