Federal appeals courts in two separate circuits dealt major setbacks to Kalshi this week, refusing to block state gambling enforcement across Connecticut, New York, and Nevada while the prediction market platform was hit with a new enforcement lawsuit in Arkansas.
The rulings add to a mounting series of legal hurdles confronting Kalshi over whether state-level gambling statutes apply to its event-trading platform. In the Ninth Circuit, the full 29-judge bench declined to rehear an August panel decision that allowed Nevada officials to halt sports betting on the exchange. The previous panel determined that Kalshi’s sports-related contracts do not qualify as federally protected swaps and can be treated as gambling under state law.
Meanwhile, the Second Circuit Court of Appeals rejected Kalshi’s bid for preliminary injunctions that would have prohibited regulators in New York and Connecticut from enforcing their local gaming restrictions. The three-judge panel affirmed lower district court decisions after finding that the platform failed to prove a likelihood of success on the merits. The court concurrently upheld a similar ruling against cryptocurrency exchange Coinbase.
Arkansas Attorney General Tim Griffin initiated fresh legal action in state court, arguing that Kalshi’s operations constitute unlawful, untaxed gambling. Griffin highlighted that the platform opened access to Arkansas residents as young as 18, whereas state regulations impose a minimum age requirement of 21 for electronic betting accounts alongside licensing and tax compliance standards. The Arkansas action arrives shortly after Utah brought criminal charges against the company and its founders over identical state-level gambling prohibitions.
Kalshi contends its offerings are derivatives and event swaps subject only to Commodity Futures Trading Commission oversight rather than individual state jurisdictions. The Trump administration has endorsed that interpretation, with the CFTC taking several states to court in an attempt to assert exclusive federal authority. While the Third Circuit previously agreed with Kalshi regarding operations in New Jersey, that outcome is being contested at the Supreme Court, where dozens of states have joined New Jersey in urging justices to let local gambling laws stand.
Source: arstechnica.com
