Second appeals court rules states can regulate sports prediction markets
A federal appeals court ruled September 25, 2026, that states may regulate sports prediction markets, affirming state-level oversight authority. The decision marks the second such appeals court ruling on the issue and empowers state regulators rather than maintaining uniform federal standards. Companies operating in the space now face heightened regulatory risks from fragmented state-by-state rules. The ruling deepens an existing circuit split over whether CFTC registration preempts state gambling laws.
Kalshi's federal preemption shield is now cracked in two circuits. The company must fight parallel state suits in Nevada, Connecticut, and Baltimore while lower courts reconsider merits in each jurisdiction. Geofence costs multiply with every new ruling. Robinhood and Polymarket face identical exposure because the same reasoning reaches any platform offering sports-linked contracts.
Traders hold positions whose legality shifts with state borders, not regulation. Legal spend compounds across cases faster than any single resolution. The Supreme Court remains Kalshi's only path to uniform rules, but cert grants are rare. Each month of delay invites another state to file.
This second appeals-court ruling against federal preemption joins a months-long collapse of Kalshi's nationwide legal strategy that now includes two Ninth Circuit tribal losses, a pending state lawmakers' Supreme Court petition from New Jersey, and parallel state suits in Nevada, Connecticut, and Baltimore.