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The is-it-sports-betting-is-it-not saga of prediction markets has swallowed the online betting industry for the better part of an entire year. Lawsuits have been filed. So have criminal allegations. We’ve written about it at length.
And despite all this, we still don’t have an answer. Why? Because it’s been a state-by-state issue so far.
It feels like only the Supreme Court — the highest of all courts in the United States — will be able to truly decide on the issue. But to get to that point, the state of California might have to “play ball.” That’s because there’s an all-too-important case going on in the Golden State right now that could have national implications. Keep on reading, and we’ll tell you what’s going on!
California Case Could Change Everything
All eyes on a three-judge panel out in San Francisco. In late April, they heard arguments in Nevada’s case against Kalshi, the top prediction market in the country. To protect its own betting market — which has already been siphoned by the proliferation of sports betting apps around the country — Nevada sued Kalshi for reasons you’d expect: it’s illegal betting.
Of course, Kalshi says they are “events contracts” — not sports bets. And since event contracts have been federally approved already, they can operate in Nevada despite what state laws exist. This is the heart of the matter across the country, not just in Nevada.
Kalshi has been sued to hell and back by other states. But in a massive turn of events, Kalshi actually won a similar case in a different federal court — the Third Circuit — which sided with them and blocked New Jersey from shutting down their contracts.
But… just because a New Jersey court sided with Kalshi here, doesn’t mean others will too. Which brings us back to California. If the Ninth Circuit sides with Nevada and rules against Kalshi, now you’ve got a real split between federal courts. One says it’s legal. Another says it’s not. And that’s exactly the kind of situation that gets kicked up to the Supreme Court to decide since lower courts are in disagreement.
See? That’s why what’s happening in California right now has massive — and we mean massive — implications across the country. Let’s dig into the case some more.
How The Case Is Currently Going
As alluded to, Nevada sports betting is sort of in crisis mode. We mean, more than it already was since its betting monopoly was ended in 2018. For one, tourism to Las Vegas has nosedived in the last two years — partly due to ballooning prices, partly to Donald Trump’s rhetoric scaring away international visitors. Two, that means betting revenue is collapsing.
Earlier this year, the state just posted its lowest Super Bowl betting handle in a decade — $133.8 million, down 11 percent year over year. Of course, the natural question is: did prediction markets take away some of that betting? Top platforms like Kalshi, Polymarket, and Robinhood all reported record “volume” for the big game so you almost have to believe they are pulling action away.
Hence why Nevada is taking them to court, multiple times actually. The Ninth Circuit combined four separate cases into one massive hearing that ran close to two and a half hours. Besides Kalshi, Robinhood’s derivatives arm and Crypto dot com were dragged into this case. So yes, it’s all-out warfare at this point.
Based on reports of how the case has unfolded so far, the most telling moment seems to have come during a back-and-forth between Judge Ryan Nelson and a lawyer representing Crypto.com. The lawyer tried to draw a clean line between a traditional sportsbook bet and a “sports event contract.” His argument? When you bet at a sportsbook, you’re betting against the house. But on these platforms, you’re trading in an open market, with a clearinghouse in the middle. In the end, that distinction makes it a financial product — not gambling.
Judge Nelson, though, pushed back. He repeatedly asked, if the end result is the same — you put money down on a game outcome — then what’s the real difference? Calling it a “trade” instead of a bet might work on technicalities, but in practice, it looks identical.
Judge, welcome to the national discourse about this issue. Everyone agrees it’s the same thing, but legal jargon and technical classifications are muddying the answer, hence why the Supreme Court might need to step in.
Odds Are Saying SCOTUS Won’t Review
In a not-so-ironic twist of fate, prediction markets are already letting people trade on whether the Supreme Court will hear the prediction market case. Polymarket had the odds around 39 percent that SCOTUS grants certiorari by December 31, with shorter odds (11 percent) for a decision by July. Go figure!
Again, California ruling in favor of Nevada would go a long way toward getting SCOTUS to care about the issue. That’s a ways away still, though. The Ninth Circuit panel said it is expected to rule within a period of 60 to 120 days. As soon as we get word on it, we’ll be sure to update you on the matter so check back with us regularly for the potential landmark decision.
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