U.S. appeals court rules against prediction markets, sets up likely fight at Supreme Court

August 28, 2026 - 17:40

The Ninth Circuit Court of Appeals has ruled that sports-related event contracts are not swaps, directly contradicting an earlier decision from the Third Circuit and setting the stage for a likely Supreme Court review. The decision, handed down on Friday, strikes down the Commodity Futures Trading Commission's (CFTC) attempt to classify these contracts as derivatives, a move that could reshape the legal landscape for prediction markets.

The case centers on whether event contracts, such as those allowing bets on the outcome of football games or political elections, fall under the same regulatory umbrella as traditional financial swaps. The Third Circuit in April had sided with the CFTC, arguing that these contracts could be regulated as swaps. The Ninth Circuit disagreed, stating that the plain language of the Commodity Exchange Act does not support that interpretation.

This split between the two federal appeals courts is a classic trigger for Supreme Court intervention. Legal experts say the high court is now highly likely to take up the case to resolve the conflict. The ruling is a major win for platforms like Kalshi and Polymarket, which have argued that their products are not financial instruments but rather a form of wagering on future events. The CFTC, however, has maintained that these markets pose risks to the integrity of financial markets and could be manipulated. The immediate practical effect is that the Ninth Circuit's ruling applies only to its jurisdiction, but the legal uncertainty remains for the rest of the country.