Prediction-market platform Kalshi is facing a growing legal battle over whether states can regulate its sports contracts as gambling, with conflicting federal court rulings raising the prospect of a US Supreme Court showdown.

The 9th US Circuit Court of Appeals ruled on 28 August that Nevada can enforce its gambling laws against Kalshi, rejecting the company’s argument that its status as a federally regulated derivatives exchange shields it from state oversight.

The unanimous ruling upheld a lower court decision allowing Nevada to require Kalshi to obtain a gaming license for its sports-related contracts.

Kalshi argues that its event contracts are financial derivatives regulated exclusively by the Commodity Futures Trading Commission under the Commodity Exchange Act.

Nevada and other states counter that contracts tied to sports outcomes function like traditional sports bets and therefore fall under state gambling laws.

The 9th Circuit sided with Nevada, saying federal commodities law does not turn the CFTC into a national gambling regulator or strip states of their authority to police wagering.

The decision conflicts with an earlier ruling from the 3rd Circuit, which barred New Jersey from regulating Kalshi’s operations.

That split increases the chances that the Supreme Court could eventually be asked to settle whether federal commodities rules override state gambling laws.

Kalshi is fighting similar battles across the country.

Court records show the company has challenged regulators in Arizona, Illinois, Iowa, New York, Utah and other states, arguing that federal law preempts state attempts to regulate its markets.

In Arizona, a federal court noted that decisions in similar Kalshi cases were already divided, with some courts granting the company protection from state enforcement and others refusing to do so.

The legal fights come as prediction markets such as Kalshi and Polymarket have grown rapidly, particularly around elections and sports.

Kalshi has also expanded beyond political and sports markets into contracts tied to economic data, weather and other events.

Businesses have begun experimenting with prediction markets as a way to hedge against unusual risks, although critics continue to argue that many of the contracts amount to gambling dressed up as financial products.

The Nevada case was sent back to a lower court for further consideration of Kalshi’s election-related contracts.

For now, trading on Kalshi remains suspended in Nevada while the company pursues further legal review.