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A three-judge Second Circuit panel denied Kalshi an injunction protecting it from New York and Connecticut enforcement of gambling laws, according to The Event Horizon. The development puts the legal treatment of sports event contracts at the center of the dispute involving the two states.
Judges question whether sports contracts qualify as swaps
During the hearing, judges expressed doubts that sports event contracts could qualify as swaps, The Event Horizon reported. That classification is a central issue in the dispute over whether the products fall under federal financial regulation or state gambling laws.
The newsletter also described the judges as appearing to look for ways to avoid allowing New York and Connecticut to ban the products for now. That account of the hearing reflects the source’s interpretation of the judges’ comments, rather than a separate ruling on the products’ legal status.
The case follows earlier action in New York. PlayNY reported on Aug. 3 that New York sued Kalshi for $36 billion as the NFL pressed the Commodity Futures Trading Commission for tougher sports-event contract rules.
Prediction markets face broader political scrutiny
The appellate development comes as prediction markets face the prospect of increased scrutiny after the 2026 midterm elections. According to The Event Horizon, Democrats won control of both the House and Senate, an outcome that prediction markets and polls had anticipated.
The newsletter’s author expects congressional hearings involving Kalshi, Polymarket, the CFTC’s role and Donald Trump Jr.’s involvement in the industry. Congressional Democrats have taken issue with the rise of prediction markets, the piece says.
State-level pressure is also extending beyond New York and Connecticut. The Event Horizon cited an SBC Americas report that an Ohio senator wants legislation classifying sports prediction markets as sports gambling and banning election trading through event contracts.
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Source: As reported by nexteventhorizon.substack.com.
