Shares of DraftKings Inc. and Flutter Entertainment Plc rose on Friday after a U.S. appeals court ruled that sports betting does not qualify as swaps under federal legislation, a decision that removes regulatory uncertainty for prediction markets.
The Ninth Circuit Court of Appeals in California issued the ruling in a lawsuit filed against Kalshi Inc., a prediction market operator. The court determined that sports betting transactions do not meet the definition of swaps under the Commodity Exchange Act, a classification that had previously raised compliance concerns for similar platforms.
DraftKings advanced 6.5% in New York trading, while Flutter Entertainment's ADRs climbed 4.6% in London. Both companies operate prediction markets and sports betting platforms, sectors that had faced potential regulatory scrutiny following the lawsuit. The decision removes a key legal ambiguity that could have imposed stricter oversight on the industry.
Kalshi, which operates a platform for event-based prediction contracts, had been targeted in the lawsuit alleging its activities violated swap regulations. The appeals court's ruling effectively narrows the scope of what constitutes a swap under federal law, providing clarity for operators in the prediction market space.
The decision comes as the broader sports betting and prediction market sector continues to expand, with companies increasingly exploring event-based wagering beyond traditional sports outcomes. Analysts noted that the ruling reduces compliance burdens for firms in the space, though regulatory oversight remains subject to state-level and other federal rules.
