GoKawiilA federal judge’s order blocking Arizona from prosecuting online prediction market company Kalshi for violating the state’s gambling laws is living on borrowed time after the 9th U.S. Circuit Court of Appeals ruled that gambling on sporting events is not protected by the federal law that otherwise allows prediction market firms to operate.
The ruling, which came in a similar but separate Nevada case, directly undercuts the rationale used by federal Judge Michael Liburdi earlier this year when he issued an injunction stopping Arizona Attorney General Kris Mayes from prosecuting Kalshi and suing the firm for violating Arizona’s gambling laws and a law that makes it illegal to bet on election outcomes in the Grand Canyon State.
Arizona could use the Nevada decision to argue that Liburdi should allow the Arizona case to proceed.
In its ruling that upheld a lower court’s decision to dissolve an injunction allowing Nevada regulators to bar Kalshi from offering trades — known as “swaps” in the commodities market, referring to a contract whose value depends on some future outcome — on sporting events, the three-judge panel concluded that sports events don’t qualify as “swaps,” and thus aren’t protected by federal law.
In May, Liburdi sided with Kalshi’s broad reading of the federal Commodity Exchange Act and concluded that sporting events qualify as “events” and “occurrences” under that law, meaning they can only be regulated by the Commodity Futures Trading Commission, the federal agency that oversees prediction markets. And that agency has largely declined to stop companies like Kalshi from accepting bets on virtually anything they want, including sports and elections.
But on Friday, the appellate judges — all of whom were appointed by President Donald Trump — rejected that view, holding that reading “event” to mean “outcome” is an “archaic or rare usage,” and that the words “event” and “occurrence” must carry independent meaning.
As an example, the court explained that whether the Super Bowl happens is an “occurrence,” but who wins it is not.
“Congress did not take a wrecking ball to all sports gambling regulations built up over decades by federal, state, and tribal governments when it amended the (Commodity Exchange Act),” Judge Ryan Nelson wrote in the unanimous decision.
Mayes’ office initiated an appeal of Liburdi’s ruling, but the 9th Circuit put the appeal on hold until it considered other cases centering on states attempting to regulate Kalshi and other prediction markets, including this Nevada case. Now that the appeals court has sided with states, it paves the way for Liburdi’s injunction to be dissolved.
“This is a significant win for states’ authority to regulate gambling operations. Calling a sports bet a ‘swap’ doesn’t make it one,” Mayes said in a statement celebrating the ruling. “States like Arizona have built a comprehensive system to regulate gaming and today’s ruling affirms those regulations.”
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