Bits + Bips: Is Kalshi Headed to the Supreme Court Next?

**SPEAKER_1** (0:00)
You're listening to a brief segment from one of the Bits and Bips episodes this week. The full show is now only available on its own dedicated Bits and Bips channels. So be sure to go to X, YouTube, and your favorite podcast platform and search for Bits plus sign Bips, spelled B-I-P-S, and subscribe.

**Austin Campbell** (0:21)
But the ruling was that the Ninth Circuit ruled 3-0 that Nevada can enforce its gambling laws against Kalshi's sports event contracts.
Judge Ryan Nelson specifically said Kalshi sports contracts are, quote, a quintessential form of gambling outside the CFTC's purview. This directly conflicts with the Third Circuit's April ruling that Kalshi is actually regulated by the CFTC. That was in New Jersey. This means we have a live circuit split, which is why I have specifically flagged the Supreme Court part. That is catnip for the Supreme Court in the number one way that they end up taking cases, because to say the exact same federal law means this here, but something different over here is the exact thing they are meant to guard against. So, as you can imagine, the Gaming Association likes this. They are calling it a significant win for consumer protections and taxpayers, a big loss for Kalshi and other backdoor sports gambling operations, again, Gaming Association CEO.
But Zach Fulton, a CFTC spokesman on the split, said, a derivative contract structured as a swap is a swap, regardless of the underlying subject matter, the Ninth Circuit aired. Now, what this means for the industry is Robinhood and crypto.com have similar parallel suits in Nevada. Roughly 20 states are now in litigation over prediction markets. A Supreme Court fight is looking increasingly likely according to CBS News. So I'm going to start, Andy, with you at Kalshi. This obviously has created a mess for you guys internally. I'll use that word so you don't have to say it because you now have two different federal courts telling you mutually contradictory things. How did this land on the day of? How do you even think about that situation?

**Andy Ross** (2:18)
Okay, that's a great question. I guess it's safe to say we're disappointed by the ruling. We didn't think it would go that way. Secondly, I guess from my side, prediction markets are super different from sportsbooks.
The exchange works exactly like a commodity exchange where buyers face the sellers. You don't face a book that is generating a price against you. It's a fair and competitive market price just like commodities markets or just like interest rates or FX or equity markets.
You can see on the charts that we produce on the on, you just have to go on to kalshi.com and look. We see that promotes healthy price discovery. There's nothing hidden. You can see where the order book is. You can see where the depth of the market is.
If you make money on Kalshi, well, you made money on Kalshi and you can continue to make money on Kalshi. In fact, we like you to make money on Kalshi because you're improving the aggregate quality of the prediction of the market. You're making the market a better quality. That's got a societal benefit. If you make money on a sports book, they ban you and say, I'm sorry, you're too clever. You're not allowed to trade with us anymore. So to declare all those things exactly the same, that feels a little difficult to me. The nationwide regulation, as you say, was enacted because large and diverse liquidity pools with large and diverse participants are critical, and that's what you've seen in all of our other economic markets, all of our other swap markets around the country. And so yeah, I think that that's, do we end up with a Supreme Court, the various steps occur before them, still considering the group, are considering that work here. Yeah, but look, disappointed. But what we are doing, genuinely, is one, following the law and then two, just getting on with it, getting on with servicing customers, listening to clients, and our volume continues to grow, week over week, month over month. And we've got millions and millions of users on the app. And so this isn't something that has been forced down people's throats. This is something that people are either enjoying, liking the price discovery of, or feeling that they've got some value to add about it. And if you go talk to the winners on Kalshi, I don't think they talk about it as gambling. They talk it about as making prices in derivative contracts that they are happy to be trading on.

**Austin Campbell** (4:44)
So Chris, I want to ask you here, because I know both of us have some friends at the CFTC, and I know you've met on some of their advisory boards.