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- A prominent prediction market executive recently defended her exchange model against state gaming regulators during an ongoing legal battle.
- The high-profile dispute highlights a deepening federal appeals court split over whether sports event contracts constitute federally regulated swaps or state-governed gambling.
Kalshi says its sports event contracts are federally regulated prediction markets, but its ongoing fight with Nevada regulators is becoming a central test of whether states can treat those products like sports betting.
The dispute matters well beyond one company. Recent rulings from the Sixth Circuit and Ninth Circuit have backed state authority in some cases, while a Third Circuit decision involving New Jersey went the other way, creating the kind of split that analysts say could send the issue to the U.S. Supreme Court next year.
Kalshi argues its exchange model is different from a sportsbook
Kalshi, a New York-based prediction market platform, lets users trade contracts tied to sports results on an exchange overseen by the Commodity Futures Trading Commission. Co-founder Luana Lopes Lara told the Las Vegas Review-Journal that the company should not be treated like a casino or sportsbook because customers trade against each other rather than against the house.
“There’s a very big difference in the model between a casino or sportsbook and an exchange,” Lara said. She added: “In exchanges, we don’t actually trade against our customers. Our customers are trading against each other. They are the ones setting the price.”
Kalshi received CFTC approval in 2020 and launched publicly in July 2021.
Nevada regulators challenged the company in March 2025, accusing it of illegally taking sports bets through its online prediction market. In April, a Carson City judge ruled that Kalshi could not offer contracts involving sports results to Nevada residents and ordered the company to geofence the state. Lara said Kalshi complied.
Nevada dispute highlights taxes, minors and state oversight
According to Lara, Nevada regulators continue to target Kalshi even after the geofencing order. State concerns include whether minors could access the platform and the fact that Kalshi does not pay Nevada gaming taxes.
Lara disputed those criticisms, saying Kalshi uses identity and Social Security checks, surveillance, and AI and machine-learning tools to block underage users. “I would actually claim that we have more protection than most states against minors,” she said.
On taxation, Lara said states can still tax prediction markets. Nevada casinos and sportsbooks pay a 6.75 percent tax on gross gaming income.
She also said Kalshi favors federal oversight because a state-by-state system creates a patchwork of rules that raises costs and limits consumers.
Circuit split could shape what happens next
Kalshi lost a ruling in the Sixth Circuit Court of Appeals last week, with that court saying states including Ohio and Tennessee can regulate sports event contracts under state gambling laws. That outcome aligns with a Ninth Circuit decision involving Nevada and conflicts with a Third Circuit ruling from New Jersey.
That split is now the key issue to watch. If the courts do not reconcile it themselves, the Supreme Court could be asked to decide whether sports event contracts belong primarily under federal commodities regulation or state gambling control.
The outcome would affect not only Kalshi, but the wider market for sports-based prediction contracts in the U.S.
Source: As reported by Richard N. Velotta.
