Many prediction market firms have sought to avoid state regulation by emphasizing how their services differ from traditional sports betting. They characterize their offerings as “event contracts” or “swaps,” which are only subject to Commodity Futures Trading Commission (CFTC) oversight and note that they operate peer‑to‑peer exchanges, earning revenue from transaction fees rather than customer losses. Many state regulators have disagreed with this argument, however, asserting that event contracts cannot be distinguished from state-regulated gaming. Federal courts in various states have reached different conclusions on this issue. A Nevada federal court has now weighed in, ruling that some of these services fall under state gaming law.

Judge Andrew Gordon of the U.S. District Court for the District of Nevada recently dissolved an injunction that had shielded prediction market company Kalshi from state enforcement and held that Kalshi’s expanded sports products — specifically its prebuilt parlays and player‑prop‑style markets — are not swaps under the Commodity Exchange Act. According to Judge Gordon, these particular contracts closely resemble sportsbook bets and therefore fall within Nevada’s gaming regime. For this reason, the court concluded that sports outcome markets cannot evade oversight by the Nevada Gaming Control Board and the Nevada Gaming Commission.

Following the decision, Kalshi filed an emergency motion seeking a stay pending appeal. Nevada have responded, stating that although they would not commence any enforcement action while the court considers the request for a stay, they will oppose that request. If the stay is denied, enforcement could proceed against Kalshi’s sports markets and, by extension, other prediction platforms offering similar products.

This decision is a setback for companies operating prediction markets, as the prior decision in Nevada marked an early and significant win for the legal theory advanced by prediction market operators. Businesses operating in this space should continue to closely monitor court decisions and assess their products on a state-by-state basis to determine whether the ruling could affect their offerings.