Appeals Court Rules Prediction Markets Are Gambling
A unanimous 9th Circuit panel ruled Friday that sports event contracts are gambling rather than financial swaps, allowing states to regulate prediction markets like sportsbooks and creating a circuit split.
The Morning Brief Desk · August 29, 2026 · Based on reporting by The Hill
A federal appeals court ruled Friday that contracts tied to the outcomes of sporting events are gambling, not financial swaps, opening the door for individual states to regulate prediction-market platforms the same way they regulate sportsbooks. The 9th Circuit Court of Appeals decision was unanimous, with the three-judge panel voting 3-0.
The ruling is a significant legal defeat for the fast-growing prediction-market industry, which lets users buy and sell contracts pegged to real-world outcomes, including sports results. Quartz reported that the decision affects platforms including Kalshi, Crypto.com and Robinhood.
The 9th Circuit's conclusion directly contradicts a ruling the 3rd Circuit issued in April, which found the opposite on the question of whether these contracts qualify as swaps. That disagreement between two federal appeals courts, known as a circuit split, makes Supreme Court review likely, according to CNBC. If the justices take the case, they would have the final word on how the multibillion-dollar industry is regulated. The material available Friday did not include reactions from the affected companies or details on when or whether any party plans to seek Supreme Court review.
The context
The central legal question is one of classification: whether event contracts traded on prediction-market platforms are swaps, a category of financial instrument, or gambling products. The answer determines who regulates them. If the contracts are gambling, states can oversee the platforms as they do sportsbooks; if they are swaps, they fall under a different regulatory framework.
In April, the 3rd Circuit weighed the same question and concluded that the contracts do qualify as swaps, reaching the opposite result from Friday's 9th Circuit panel. The industry has grown quickly in the meantime, with millions of Americans using prediction markets to bet on sports and elections, and the platforms now handle billions of dollars. How the dispute arrived at the 9th Circuit, and which parties brought the case, was not detailed in the material available.
Why it matters
The ruling could reshape how a multibillion-dollar industry operates. If states can treat prediction-market platforms like sportsbooks, companies such as Kalshi, Crypto.com and Robinhood would face a patchwork of state-level licensing and oversight rules rather than a single federal framework. Millions of Americans who use these platforms to trade contracts on sports and elections could see changes in where and how the products are offered. Because two appeals courts have now reached opposite conclusions, the question is unsettled nationwide, leaving both regulators and platforms without a definitive answer until a higher court resolves the split.
What’s next
The circuit split makes a Supreme Court fight likely, and the justices would have the final say over the industry's future if they take a case. No petition for review had been announced in the material available Friday. Open questions include whether affected platforms will seek rehearing at the 9th Circuit, how quickly states in that circuit might move to assert regulatory authority, and how platforms will operate while the legal conflict remains unresolved.
Sources
The Hill — Appeals court rules states can regulate prediction market platforms like gambling
A unanimous 9th Circuit panel ruled states can regulate prediction-market platforms like sportsbooks, a heavy blow to the fast-growing industry.
CNBC Top News — U.S. appeals court rules against prediction markets, sets up likely fight at Supreme Court
The 9th Circuit found sports-related event contracts are not swaps, contradicting a 3rd Circuit ruling from April and creating a circuit split.
Quartz — States can regulate prediction markets, court rules. A Supreme Court fight could be next
The 3-0 ruling creates a circuit split and sets up a likely Supreme Court showdown over the multibillion-dollar prediction-market industry.
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