A federal appeals court has ruled that states may enforce gambling laws against Kalshi, rejecting the view that federal oversight of its event contracts preempts all state-level regulation. The decision, reported by Ars Technica, is a consequential setback for the regulated prediction-market operator—and a reminder that the industry’s legal map remains fragmented even as demand and institutional interest grow.
States regain leverage
The ruling puts state gambling rules back at the center of Kalshi’s operating strategy. Kalshi has argued that its federally regulated event contracts should receive broad protection from state intervention. The appeals court’s decision instead leaves room for states to apply their own gambling laws.
That matters beyond one company. Prediction markets have often been framed as financial products, information markets, or betting-adjacent exchanges depending on the venue and jurisdiction. The ruling reinforces that federal regulation does not necessarily settle that classification everywhere. For traders and market observers, the practical result could be uneven availability, more litigation, and a higher compliance burden across state lines.
Liquidity infrastructure moves in
While the regulatory outlook gets more complicated, Betting Startups reports that BetOpenly founder Gino Donati has raised funding for Open Markets, an institutional liquidity and execution platform expanding into prediction markets.
Open Markets is intended to connect venues including Kalshi, Polymarket, ProphetX, Novig, and BettorEdge. Its focus on execution and liquidity points to a maturing layer of market infrastructure: firms are not only building consumer-facing venues, but also tools meant to help larger participants navigate fragmented pools of liquidity.
The timing is notable. As platforms face different legal structures, product types, and user bases, cross-venue execution infrastructure could become more valuable—but it also has to contend with the distinctions between regulated exchanges and other market formats.
A market caught between scale and rules
The two developments show the industry moving in opposite-looking directions that are actually intertwined. Capital is flowing toward systems that can make prediction markets easier to access and trade across venues, while courts are clarifying that expansion may still be constrained by state law.
Why it matters
Prediction markets are becoming more sophisticated, but their legal foundation remains unsettled. The Kalshi ruling may shape where and how platforms can operate, while Open Markets’ funding signals continued belief that multi-venue trading will matter. The next phase of growth may depend less on headline volume alone than on whether platforms can build liquidity and compliance structures that hold up across jurisdictions.