Court Rejects Swap Classification for Prediction Markets
On September 28, 2026, prediction market platform Kalshi suffered another unfavorable court ruling as judges declared that sports betting contracts on its platform cannot be classified as swaps and must comply with state gambling regulations. According to Ars Technica, this decision grants state regulators the authority to enforce stricter oversight and penalize prediction activities that breach local betting laws.
Loss of Federal Regulatory Shield
The court ruling affirms that prediction markets cannot circumvent anti-gambling statutes simply by labeling contracts as financial derivatives. By determining that Kalshi's sports prediction contracts fail to qualify as swaps, the court effectively stripped the platform of federal regulatory protections against state-level legal barriers.
Path Toward the Supreme Court
According to Ars Technica, Kalshi's prolonged legal battle and ongoing pushback against state gambling regulations will likely escalate to the U.S. Supreme Court for a final, definitive resolution.