US appeals courts schedule hearings in prediction-market disputes

US federal appeals courts have scheduled proceedings in two cases concerning prediction-market operators, according to reports. The First Circuit has set oral arguments in Robinhood Derivatives' appeal of a district court dismissal of its case against Massachusetts Attorney General and state gaming regulators. The Seventh Circuit has granted Kalshi's petition to appeal a Wisconsin federal court's denial of its motion to dismiss claims brought by the Ho-Chunk Nation under the Indian Gaming Regulatory Act (IGRA).

Robinhood brought the case asking the court for declaratory and injunctive relief, naming the attorney general and state gaming regulators as defendants. Judge Richard Stearns then issued an order dismissing it, citing both jurisdiction and the merits, which cleared the way for Robinhood to take the matter to the First Circuit. At issue in that appeal is the regulatory and jurisdictional question of how the Massachusetts Gaming Commission may treat sports-event contracts and prediction markets.

Daniel Wallach, a gaming attorney, posted on LinkedIn that the threshold justiciability questions are what the appeal covers at this stage, rather than the wider matter of federal law displacing Massachusetts' authority over sports event contracts as sports wagering. He also cautioned: "But you never know what might pique the appellate court’s curiosity."

In Wisconsin, the fight is over Kalshi's ability to sell sports-event contracts on Indian lands without tribal gaming authorisation, which collides with the Unlawful Internet Gambling Enforcement Act (UIGEA) carveout for CFTC-regulated designated contract markets (DCMs). Under UIGEA, CFTC-regulated DCMs fall outside the definition of "bet or wager." The Ninth Circuit, in Blue Lake Rancheria versus Kalshi, and the Western District of Wisconsin each held that IGRA reaches sports-event contracts sold on tribal lands, and each turned down Kalshi's UIGEA-carveout argument.

According to Wallach, the stakes are high: how the Seventh Circuit resolves the matter may carry major consequences where federal prediction market regulation meets tribal sovereignty.

Separately, the New York Supreme Court has ordered Kalshi to show cause why it should not be compelled to comply with investigative subpoenas from the New York State Gaming Commission. A hearing is set for 14 December, with Kalshi's response due 7 December. Former US Solicitor General Paul Clement will represent Kalshi at the US Supreme Court.

Clement wrote to the Supreme Court asking for 28 more days to submit Kalshi's opposition to New Jersey's cert petition, which pushed the filing date to 9 December. The court had been expected to decide whether to grant or deny cert on 11 January.

Brown said: "Gambling is illegal in Utah, whether you place the bet, run the game, or promote it." He added that calling it a prediction market does not change what it is and that federal registration does not put a company above the law. Kalshi described the lawsuit as "crazy overreach" and accused Brown of "playing politics," stating: "We look forward to putting a stop to this in court, just like we did in Arizona."

On Friday, FanDuel and DraftKings stopped offering their sports, politics and novelty contracts in Utah. DraftKings stated that, with immediate effect, sports, novelty, political and certain other event contracts could no longer be obtained through DraftKings Predictions by customers physically in Utah, though financial-event contracts covering stocks, commodities and cryptocurrency stay available. Positions already open in the affected markets will not be closed and will settle as usual, according to the company.

The charges came one day after the Commodity Futures Trading Commission sued to stop Utah from enforcing its anti-gambling laws against Kalshi. North American Derivatives Exchange (Nadex), the operator of the Crypto.com OG.com prediction market platform, has likewise sued Utah, responding to a suit Utah brought against Kalshi in state court on October 20. Utah filed a preliminary injunction motion on Thursday aimed at stopping Kalshi from offering event contracts for politics, elections, culture, sports and mentions, and seeking geofencing and account-based restrictions from the court at least as strict as those imposed by court orders in Nevada, Michigan and Washington. The Third Judicial District Court for Salt Lake County has yet to rule on that motion.

Arizona Attorney General Kris Mayes brought a 20-count criminal complaint against Kalshi in March, claiming that the company ran an unlicensed business and took illegal election wagers. Kalshi responded with a lawsuit asserting that its prediction markets are governed solely by the CFTC. US District Court Judge Michael Liburdi issued a temporary restraining order and an injunction that halted the criminal case while the federal preemption issue was litigated. After a Ninth Circuit ruling in the Nevada versus Kalshi dispute, Mayes asked the appeals court to remove the block; a three-judge panel found that sports-event contracts are not "swaps" and therefore lack federal law's protection. Mayes's petition is still awaiting a decision.

Polymarket is no longer opening new sports-event contracts in Michigan, which makes it the fourth prediction market exchange to stop state residents from buying the contracts. Polymarket U.S. told customers that from 26 October, anyone in Michigan, or with a verified Michigan address, is barred from opening new sports positions, while every other non-sports market stays open and deposits and withdrawals continue as before.

Henry Williams, executive director of the Michigan Gaming Control Board (MGCB), said in a statement that Michigan's approach is proving effective, given that Polymarket has joined Kalshi, Robinhood and Coinbase in pulling back from unlicensed sports contracts. Any operator that wants to take sports wagers from Michigan residents must hold a Michigan licence, he said. Back in June, US District Judge Paul Maloney of the Western District of Michigan turned down Polymarket's request for a preliminary injunction, finding that the platform had not shown immediate irreparable harm or a strong likelihood of success on the merits of federal preemption.

Under new safeguards, Kalshi will limit deposits to $2,500 a month for traders between 18 and 20 years old. The company explained in a release that the measures aim to curb problem trading among young adults and promote responsible trading ahead of the US midterm elections. Buying a contract on Kalshi requires users to be 18, whereas most states require a minimum age of 21 to gamble, sports wagering included.

Luana Lopes Lara, COO and co-founder of Kalshi, said: "Like the stock exchange, Kalshi is available on to traders 18 and older." She went on to say that because young adults are frequently inexperienced with markets and may require additional education and safeguards, the company is broadening its protections for them. Kalshi has also teamed up with Parent ProTech and ConnectSafely, organisations focused on parent and youth safety, to produce guides for parents about prediction markets.