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Bonus TL;DR
- Legal experts warn that if the U.S. Supreme Court declines to review ongoing prediction market cases like Kalshi v. Assad and Kalshi v. Flaherty, operators will be left navigating a fragmented, state-by-state legal battle over whether sports event contracts are federally regulated derivatives or state-regulated gambling.
- Without a unified Supreme Court ruling to resolve the current circuit court split, the industry’s future will likely depend on pending CFTC rulemaking or congressional intervention, such as the proposed Curtis-Schiff Prediction Markets Are Gambling Act.
The U.S. Supreme Court has not yet decided whether to hear Kalshi-related prediction market cases, but legal observers say a denial of review would likely leave operators facing a fragmented state-by-state fight over sports event contracts.
That matters because the underlying dispute goes beyond one company. If the Court passes, the legal split among federal appeals courts would remain in place, leaving prediction market operators, state regulators, and the Commodity Futures Trading Commission to keep battling over whether sports event contracts are federally regulated derivatives or state-regulated gambling products.
A Supreme Court pass would not settle the core dispute
According to DeFi Rate’s review of the litigation, the current cases include Kalshi v. Assad, Kalshi v. Flaherty, and related appeals. The article says there is already a split between the Third Circuit and the Sixth and Ninth Circuits on whether sports event contracts count as gambling and whether the Commodity Exchange Act preempts state gambling laws.
It also says similar appeals are pending in the Second, Fourth, Seventh, and 10th Circuits.
Linda Goldstein of CM Law told the outlet that the Supreme Court could still wait because the current rulings are preliminary injunction decisions rather than final merits judgments. Goldstein said the Court may also want to see the CFTC complete its pending rulemaking first.
If that happens, Goldstein said, the result would be a patchwork focused on how far state gambling law can reach, rather than who regulates the exchanges themselves. “The CFTC would still have exclusive jurisdiction over designated contract markets and trading on them,” she said.
CFTC, states, and Congress could keep fighting on separate tracks
The DeFi Rate report says the CFTC and Department of Justice, along with exchange operators, are seeking Supreme Court review. But if review is denied, Goldstein said states would continue arguing that sports event contracts are effectively sports bets and should remain subject to state gambling law.
The article says the CFTC under Chairman Michael Selig would likely pursue selective litigation in circuits where it has not yet lost, while possibly seeking stays or dismissals where its position has already been rejected.
Goldstein also said the agency could keep working through rulemaking. That could include finalizing proposed Rule 40.11 amendments and Appendix F, issuing additional rules defining event contracts as swaps, and publishing a formal interpretation on preemption. Still, she added that courts no longer defer to agency statutory interpretations after Loper Bright, which limits how far the CFTC can go without Congress.
Congress may become the clearest path to a national answer
Goldstein told the outlet that if the courts do not produce a single nationwide answer, Congress is the only body that can. The article points to one pending bill, the Curtis-Schiff Prediction Markets Are Gambling Act, introduced in March, which would treat sports and casino-style event contracts as gambling outside the CFTC’s jurisdiction.
The stakes are significant. The article says the industry handled about $51 billion in volume in 2025, and that sports have accounted for roughly 80% of Kalshi’s volume since mid-2024. It also says 44 state attorneys general told the CFTC that its proposed rule goes too far.
What comes next is still unsettled: whether the Supreme Court takes the cases, whether the CFTC finishes its rulemaking, and whether Congress steps in before the remaining circuit appeals are resolved.
Source: As reported by defirate.com.
