Some legal experts speculated that the state vs. federal jurisdiction battle over regulating prediction markets companies could soon be headed to the United States Supreme Court.

On Thursday, the US Court of Appeals for the Ninth Circuit heard oral arguments from lawyers representing prediction markets platform Kalshi and Nevada authorities over the state's ban on the prediction markets' event contracts. The appeal was over a lower court decision preventing Kalshi from offering certain event-based contracts in Nevada, based on claims that the company needed a gaming license.

The appellate judge overseeing Thursday’s oral arguments and the lawyer for Kalshi acknowledged that there had been several state-level enforcement actions against the company and other prediction market platforms, including criminal charges filed in Arizona. However, last week a federal court blocked Arizona authorities from enforcing the state’s gambling laws on Kalshi’s event contracts.

“I think the body of case law does demonstrate that what we really need to avoid here is having a state and a federal court considering exactly the same issue at exactly the same time and potentially reaching different outcomes,” said Colleen Sinzdak, representing Kalshi.

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Central to Kalshi’s argument was that the platform’s event contracts were “swaps” falling under the purview of the Commodity Futures Trading Commission (CFTC) rather than state gaming authorities. CFTC Chair Michael Selig has backed this position in the case of Crypto.com’s prediction markets against Nevada authorities.

The appellate court did not immediately announce a decision following oral arguments. Any ruling could affect how state courts treat prediction market platforms like Kalshi and Polymarket as policymakers come to terms with the growing market, expected to reach $1 trillion by 2030.

Coinbase’s top lawyer weighs in on prediction market arguments

Coinbase chief legal officer Paul Grewal, whose company was not a party to the Kalshi proceedings but has a stake in the prediction markets fight, speculated that the case could go the US Supreme Court.

“The questions at oral argument are an unreliable signal in predicting the leanings of a court,” said Coinbase chief legal officer Paul Grewal in a Thursday X post following the oral arguments. “Either way, I stand by my longstanding prediction— the Supreme Court will resolve whether sports [contracts] on [Designated Contract Markets] are swaps subject to the exclusive jurisdiction of the CFTC.”

The US Supreme Court gave states the authority to regulate sports gambling in its 2018 decision in Murphy v. National Collegiate Athletic Association.

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