The Ninth Circuit Court of Appeals ruled on August 28 that sports-related event contracts offered by prediction-market platforms are not swaps under federal commodities law, denying injunctive relief sought by Kalshi, Crypto.com and Robinhood and clearing the way for Nevada to apply its gaming regulations to the products. Shares of DraftKings Inc. (NASDAQ: DKNG) rose as much as 10% intraday, while Flutter Entertainment plc (NYSE: FLUT) gained up to 8%, according to a report from Insider Monkey republished on Yahoo Finance.
The three platforms had sought to block the Nevada Gaming Control Board from shutting down their sports-related event-contract offerings in the state. The court’s finding on the swap question is central: it determines whether the Commodity Futures Trading Commission or state gaming regulators hold jurisdiction over these products.
Prediction-market operators and the CFTC have argued that event contracts tied to sports outcomes are swaps subject to exclusive federal oversight, insulating them from state-level gambling law. Forty-four states have pushed back, arguing the contracts are sports betting dressed in financial terminology and should face the same licensing regime as sportsbooks such as DraftKings’ own prediction-market push across four states. The Ninth Circuit’s answer, at least for the contracts before it, sided with the states.
What the Ruling Does and Doesn’t Settle
The decision is an appeals-court ruling on injunctive relief, not a nationwide final judgment. It resolves the specific dispute over Nevada’s authority to enforce its gaming laws against Kalshi, Crypto.com and Robinhood, but it leaves the broader swaps-versus-gambling question open in other circuits, a split detailed in prior GIN coverage of conflicting federal court interpretations.
Kalshi has already filed a September 9 petition for rehearing, and a Supreme Court review remains possible. If the Ninth Circuit’s reasoning spreads, platforms that have used federal designation to offer sports-outcome contracts in states where traditional betting is restricted could face state licensing costs that erase their current advantage.
A Mixed Signal for Institutional Investors
The rally follows a period of valuation pressure for both companies, with analysts citing prediction-market competition as a headwind. Hedge fund ownership in DraftKings fell from 61 to 54 between the first and second quarters, while Flutter’s holdings dropped more sharply, from 57 to 37 over the same period – a decline that predates the ruling and suggests institutional caution had already set in regardless of the eventual legal outcome, a dynamic also shaping Flutter’s recent EBITDA guidance commentary.
A single-day rally driven by a legal decision carries its own risks if an appeal narrows the ruling’s practical effect. Whether institutional investors return with sustained buying, rather than a one-time price move, will be the clearer test of whether the decision changes the long-term investment case for either stock.
Source: Yahoo Finance / Insider Monkey
When he is not analysing the latest compliance updates or dissecting quarterly operator results, Florian follows Bundesliga football closely and maintains a healthy skepticism toward anyone claiming to have cracked a winning betting system. He brings a grounded, insider-aware perspective to his writing and is always more interested in the structural story behind the headline than the headline itself.