WASHINGTON — Delivering a crushing blow to the financial technology sector, a federal appeals court ruled Tuesday that placing monetary wagers on the outcome of future events to win cash is legally indistinguishable from gambling.
The decision creates a circuit split over platforms like Kalshi and Polymarket, which have long maintained that allowing users to bet their net worth on congressional races and global crises is actually a vital "information discovery" tool. Tech advocates argue the platforms provide a public service by crowd-sourcing predictions, even if that service occasionally involves someone losing their mortgage on a geopolitical conflict.
It is frankly insulting to compare us to a casino just because our users put down money on an uncertain outcome and either lose it all or get a cash payout," said Brendan Fallow, Head of Epistemological Hedging at Kalshi. "When a user puts fifty grand on the Federal Reserve keeping rates flat, he isn't gambling—he is bravely contributing liquidity to the marketplace of ideas.
The Commodity Futures Trading Commission (CFTC), which brought the initial regulatory action, successfully argued that re-labeling a parlay as an "event contract" does not magically exempt it from federal oversight. The court's majority opinion noted that betting on whether a foreign head of state will survive the month utilizes the exact same underlying legal mechanism as a DraftKings wager on the Super Bowl coin toss.
The appellate decision directly contradicts a previous ruling from a lower circuit, which had previously determined that prediction markets were legally distinct from sportsbooks because the people losing the money were tech founders rather than degenerate handicappers.
Federal regulators indicated that the split rulings will likely necessitate a final resolution by the Supreme Court, prompting thousands of prediction market users to immediately begin betting heavily on which way the justices will rule.