After Kalshi filed an appeal, the compliance dispute in the prediction market may be handed over to the U.S. Supreme Court

The U.S. Court of Appeals for the Ninth Circuit heard oral arguments from lawyers representing the prediction market platform Kalshi and Nevada authorities regarding Nevada's ban on the platform's event contracts. This appeal stems from a lower court ruling that prohibited Kalshi from offering certain event-based contracts in Nevada based on the claim that Kalshi requires a license.

The appellate court judges responsible for Thursday's oral arguments and Kalshi's lawyers acknowledged that there have been several state-level enforcement actions against Kalshi and other prediction market platforms, including criminal charges filed in Arizona. However, a federal court last week blocked Arizona authorities from enforcing the state's gambling laws against Kalshi's event contracts.

"I believe existing case law does indicate that what we want to avoid here is state courts and federal courts simultaneously considering the exact same issue and potentially reaching different conclusions," said Colleen Sinzdak, representing Kalshi.

The core argument of Kalshi's debate is that the platform's event contracts fall under "swap" transactions and should be regulated by the Commodity Futures Trading Commission, rather than state gambling regulators. CFTC Chairman Michael Selig supported this position in the case involving Crypto.com's prediction market and Nevada authorities.

Coinbase Chief Legal Officer Paul Grewal predicted that this case may be appealed to the U.S. Supreme Court. "The questions in the oral arguments are not a reliable signal of the court's leanings; nonetheless, I stand by my long-standing prediction that the Supreme Court will rule on whether sports contracts on designated contract markets fall under the exclusive jurisdiction of the CFTC as swap transactions."