On April 16th, the Ninth Circuit Court of Appeals in San Francisco held a nearly 150-minute oral argument, pushing the legal battle between prediction markets and state gambling laws to the next critical juncture. A panel of three judges heard four parallel appeals on the same day involving Nevada against Kalshi, Robinhood Derivatives, and the North American Derivatives Exchange, with the core dispute being whether the Commodity Exchange Act takes precedence over state gambling laws for sports event contracts on designated contract markets. Previously, on April 6th, the Third Circuit Court of Appeals in Philadelphia, by a 2-1 vote, upheld a preliminary injunction preventing New Jersey from blocking Kalshi contracts. If the Ninth Circuit rules otherwise, a clear split would emerge at the federal appellate level, almost certainly paving the way for the Supreme Court to intervene. Currently, the Polymarket platform estimates a 39% probability that the Supreme Court will take up this case by December 31st of this year.
A debate about definitions, denounced by the judge as sophistry
The most intense clash during the hearing occurred between Circuit Judge Ryan Nelson and the attorney representing the North American Derivatives Exchange. The attorney argued that sports betting under Caesar's sports gambling is a gambling activity by the bookmaker, whereas sports event contracts listed on designated contract markets are public market transactions through financial intermediaries, allowing participants to hedge risks. Judge Nelson bluntly dismissed this as "the epitome of sophistry." This confrontation struck a nerve in the prediction market industry: their products are essentially sports betting under a different name or a genuine financial derivative, which is almost indistinguishable on a smartphone screen to the average user.
The Commodity Futures Trading Commission, which submitted an amicus brief to the Ninth Circuit, also supported the prediction markets during the hearing. At the industry level, Josh Sterling, a partner at Milbank law firm, pointed out in a webinar last month that if a split occurs between the state supreme courts and the circuit courts, the Supreme Court is more likely to take up such cases. He believes prediction markets should be viewed from a broader perspective—they show how sports, culture, and politics are part of everyday life, and for fundamental issues involving textual interpretation, the Supreme Court may ultimately step in to resolve them. Attorneys from Holland & Knight provided a more specific timeline in their briefing: if the split forms this year, a petition for review could be submitted in early 2027, with the Supreme Court possibly deciding to hear the case during its October 2027 term, thus making a ruling before the 2028 presidential election.
Nevada's stakes and the Ninth Circuit's countdown
Nevada's betting amount during this year's Super Bowl fell to a ten-year low of $133.8 million, an 11% decrease from last year, with the diversion effect of prediction markets widely regarded as the main driver. As one of the largest gambling markets in the US, Nevada sees this lawsuit as a key battle to protect its core economic interests. The Ninth Circuit panel indicated after the hearing that a decision is expected within 60 to 120 days.
PASA official website continues to track global prediction market regulation and judicial dynamics, noting that the divergence among US federal circuit courts not only provides a procedural springboard for the Supreme Court's intervention but also accelerates the push for these disputes to move from a legal gray area to institutionalized final adjudication. The once as high as 64% probability of the Supreme Court taking the case on Polymarket, and the current 39% betting market expectation, are literally pricing the second half of this legal drama.
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This article is from "PASA-Global iGaming Leaders," a gambling industry news channel: https://t.me/pasa_news
Original in-depth gambling channel: https://t.me/gamblingdeep
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PASA Matrix: @pasa002_bot
PASA official website: https://www.pasa.news
