A three-judge panel at the 9th Circuit Court of Appeals issued a unanimous ruling on Friday, determining that states have the legal authority to regulate prediction market platforms as gambling or sports betting operations. The decision serves as a significant legal setback for the prediction market industry, which has sought to distinguish its services from traditional gaming.

The case centered on the platform Kalshi, which had challenged the ability of state-level gaming regulators to exercise oversight over its operations. Kalshi’s legal argument rested on the premise that prediction markets are distinct financial instruments that should be governed exclusively by federal authorities rather than state gaming commissions. However, the appellate court disagreed, affirming a lower court’s decision that allows Nevada gaming regulators to treat these platforms similarly to sportsbooks.

This ruling clarifies the regulatory landscape for companies operating in the prediction market space, confirming that they are subject to state-level compliance requirements. By categorizing these platforms alongside traditional gambling, the court has effectively granted states the power to enforce licensing and oversight protocols that were previously contested by the industry. The decision is expected to have broad implications for how these platforms operate across different jurisdictions, as they must now navigate a patchwork of state-level gaming laws in addition to federal financial regulations.