US appeals court does not recognize sports contracts as swaps
The US Court of Appeals for the Ninth Circuit denied prediction market platforms preliminary injunctive relief against the Nevada Gaming Control Board. The court concluded that contracts on sporting events are not swaps, a type of derivative financial instrument regulated at the federal level. CNBC reports.
Kalshi, Crypto.com and Robinhood lawsuits
The court rejected appeals by the Kalshi and Crypto.com platforms, which had sought to bar Nevada from stopping their operations in the state. The state considers these services' offerings to be gambling conducted outside the established regulatory system. The court also denied preliminary injunctive relief to Robinhood, whose trading platform offers event contracts.
The dispute concerned sports event contracts. Forty-four states argue that such products are effectively sports bets. At the same time, the platforms and the US Commodity Futures Trading Commission (CFTC) insist that all event contracts, regardless of topic, are swaps and should be regulated by the CFTC.
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Conflicting appellate court rulings
The CFTC claims exclusive jurisdiction to regulate event contracts and has already filed lawsuits against nine states to defend this right. However, the Ninth Circuit disagreed with this approach, stating in its ruling in the Kalshi case that sports contracts are not swaps because they are sports bets.
The ruling contradicts the position of the US Court of Appeals for the Third Circuit, which ruled in early April that only the CFTC has jurisdiction to regulate sports event contracts. Columbia Law School professor Joshua Mitts called the situation a classic split in federal appellate court rulings and noted that this legal dispute could reach the US Supreme Court.
Following the Ninth Circuit's ruling, shares of online bookmaker DraftKings rose 7%, while those of Flutter Entertainment, FanDuel's parent company, increased by more than 6%.
