Executive Summary
As of 29 August 2026, the US regulatory position on sports prediction markets is less settled, not more. The Third and Ninth Circuits have reached conflicting conclusions at the preliminary-injunction stage over whether federal commodities law prevents states from applying gaming regulation to sports event contracts.
Two Courts, Two Approaches
On 6 April, the Third Circuit affirmed preliminary relief protecting Kalshi from New Jersey enforcement. The court concluded that Kalshi had shown a reasonable likelihood of success in arguing that its sports event contracts are swaps traded on a CFTC-regulated DCM and therefore fall within the CFTC's exclusive jurisdiction.
On 28 August, the Ninth Circuit reached the opposite result in Kalshi's Nevada dispute. It held that Kalshi had not shown a likelihood that federal law preempts Nevada gaming regulation of its sports contracts, reasoning that those contracts were not swaps under the relevant provision and emphasizing the CFTC's existing regulation concerning gaming contracts. The court remanded the separate election-contract issue for further consideration.
These are preliminary-injunction decisions rather than final Supreme Court resolution of the underlying question, but the practical divergence is important. At the same time, the CFTC has strongly asserted federal jurisdiction, suing states including New York, Wisconsin and New Mexico, while its 2026 prediction-market rulemaking process has sought input on the treatment of event contracts and activities including gaming.
Regulation Changes the Commercial Model
This is not merely a legal issue. If availability differs by state or changes through litigation, national distribution becomes harder to plan. That affects customer acquisition, partnerships, compliance costs and—critically—liquidity, because restricting access to part of the customer base can fragment the same market geographically.
It also changes competitive positioning. Federally regulated prediction-market operators benefit most from broad federal preemption; state-licensed sportsbooks and gaming interests benefit from a framework in which sports contracts remain subject to state gaming regimes. Technology providers, sports organizations and financial distributors meanwhile face a more complex partnership decision because counterparties may have materially different regulatory exposure.
PSG View
Regulatory uncertainty is becoming a market-structure variable. Companies evaluating the sector should not treat regulation as a legal checklist added after commercial strategy. The expected regulatory perimeter affects which products can scale, how liquidity pools develop, which partnerships are viable and whether a national distribution model is realistic.
The immediate questions are further appellate proceedings, potential Supreme Court involvement, CFTC rulemaking and how other states apply the Ninth Circuit's reasoning. Until those issues develop, national market-entry assumptions around sports event contracts deserve more scrutiny than they did even a week ago.
For informational purposes only. Nothing published by Prediction Strategy Group constitutes investment, trading or legal advice.