Ninth Circuit Ruling Boosts DraftKings, Flutter Over Kalshi Sports Bets

Nine states inside the Ninth Circuit's jurisdiction just got told they can treat sports prediction contracts exactly like they treat a bet placed at a sportsbook window. That single distinction, swap versus wager, has been worth billions in market value swings over the past year, and on Friday it swung hard toward the incumbents.

Shares of DraftKings jumped as much as 10% and Flutter Entertainment, the parent of FanDuel, rose as much as 8% after a three-judge panel on the Ninth Circuit Court of Appeals rejected requests from Kalshi, Robinhood and Crypto.com to block Nevada regulators from shutting down their sports-related event contracts. The panel wrote plainly that "the substance of the sports event contracts offered on Kalshi's exchange is sports gambling, regardless of whether Kalshi calls them swaps." Judges even called it disingenuous that Kalshi had marketed the same products as sports betting before pivoting to "swap" language in court, according to CNN.

The stakes go beyond one afternoon's stock pop. Prediction-market platforms and their federal regulator, the Commodity Futures Trading Commission, have argued that event contracts, including those based on sports outcomes, are subject to exclusive federal jurisdiction as a type of derivative known as a swap, preventing individual states from regulating or prohibiting them. That framing let Kalshi and rivals sell what amounted to sports betting in states where licensed books like DraftKings and FanDuel couldn't legally operate, sidestepping the patchwork of state licensing fees and taxes that traditional operators have paid for years. Forty-four states have objected, claiming that these products are essentially sports betting disguised in financial terms and should be subject to the same state-level gambling regulations that govern licensed sportsbooks such as DraftKings.

This isn't the final word. The 3-0 ruling creates a circuit split with a Third Circuit decision and sets up a likely Supreme Court showdown. That April ruling out of Philadelphia went the opposite way, finding event contracts fall under federal swap rules. Robinhood has already said it intends to appeal, and Kalshi's litigation team has signaled the fight is headed to the Supreme Court regardless of which circuit gets there first.

For DraftKings and Flutter, the near-term relief is straightforward. The ruling reduces a significant structural threat to DraftKings and Flutter's models, eliminating the disadvantage they've faced against platforms operating in a legal gray area. Whether that advantage sticks depends entirely on nine justices in Washington, not three judges in San Francisco.