After Kalshi Appeals, Prediction Market Compliance Dispute May Head to US Supreme Court

BlockBeats News, April 17, Thursday

The U.S. Ninth Circuit Court of Appeals heard oral arguments on Thursday between lawyers representing the prediction market platform Kalshi and Nevada authorities regarding Nevada's ban on the platform's event contracts. The appeal stemmed from a lower court ruling based on Kalshi's need for a license, which prohibited it from offering certain event-based contracts in Nevada.

The appellate court judge overseeing Thursday's oral arguments and Kalshi's lawyers both acknowledged several state-level enforcement actions against Kalshi and other prediction market platforms, including criminal charges filed in Arizona. However, last week a federal court enjoined Arizona authorities from enforcing the state's gambling law against Kalshi's event contracts.

"I think existing precedent really does suggest that what we want to avoid here is simultaneous consideration of precisely the same issue by a state court and a federal court, which may reach different conclusions," said Colleen Sinzdak, representing Kalshi.

The core argument of Kalshi's defense is that the platform's event contracts are "futures" trades under the jurisdiction of the Commodity Futures Trading Commission (CFTC) rather than state gambling regulators. CFTC Chairman Michael Selig supported this position in Crypto.com's prediction market case against Nevada authorities.

Paul Grewal, Chief Legal Officer of Coinbase, predicted that this case may be appealed to the U.S. Supreme Court. "The questions during oral arguments are not a reliable indicator of the court's leanings, but in any case, I stick to my long-standing prediction that the Supreme Court will rule on whether sports contracts in designated contract markets fall under the CFTC's exclusive jurisdiction over futures trades."