Kalshi's ongoing legal dispute with various states hinges on a singular assertion: its event contracts qualify as swaps, thereby placing them under the exclusive jurisdiction of federal authorities. This issue has led to a split among two federal appellate courts regarding its applicability to sports betting.
In an in-depth analysis, Gambling Insider examined Kalshi's entire trading history and discovered that the contracts most likely to be classified as swaps—such as those related to interest rates, inflation, elections, and index levels—accounted for just 0.6% of the total amount wagered by customers in August.
The debate surrounding whether prediction markets are essentially gambling has been filled with rhetoric but lacking in concrete data. To clarify this, Gambling Insider sourced data directly from Kalshi's trading records on Dune, revealing a clearer picture than what has been presented by either side.
Kalshi's argument is not limited to justifying its financial markets through its sports markets. Instead, it asserts that every contract it offers, whether it pertains to a Yankees game or a Federal Reserve decision, qualifies as a swap under the Commodity Exchange Act.
If this interpretation holds, the Commodity Futures Trading Commission (CFTC) would have sole jurisdiction, effectively sidelining approximately two dozen states from influencing the matter. Kalshi has experienced both victories and defeats on this front, making it a pivotal issue within the industry.
While the trade record may not resolve the legal questions at hand, it does clarify the battleground. In August, over 61% of the total funds wagered by customers were tied to the outcomes of sporting events, with an additional 34% invested in short-term cryptocurrency and commodity price contracts, primarily in 15-minute markets.
This means that around 95 cents of every dollar wagered was involved in contracts whose classification as swaps is under dispute. In contrast, the contracts that are generally accepted—such as those related to rates, inflation, and government funding—only made up 0.6% of the total.
The significance of this scale is noteworthy, but not for the reasons typically cited. With approximately $11.4 billion in staked funds in August, compared to a U.S. legal sportsbook handle nearing $13.5 billion per month, Kalshi has grown to a size where its trading practices are a matter of public interest rather than a niche concern.
The composition of the trades provides insight into the direction of Kalshi's legal argument. Kalshi's reported trading volume appears inflated; the company counts each contract at its full $1 face value, which inaccurately combines small bets with larger ones. When assessed accurately, Kalshi's true trading volume for August was $11.4 billion, following $12.3 billion in July and $9.6 billion in June.
In comparison, U.S. sportsbooks recorded a handle of $40.5 billion in the first quarter of 2026 and $166.9 billion throughout 2025, as reported by the American Gaming Association.
If you annualize Kalshi's August figures, it suggests a potential $137 billion, nearing the overall U.S. industry, despite the company claiming it did not accept sports bets until the previous year.
The disparity between the two measurement methods is significant. A Kalshi contract pays out $1 if the event occurs and nothing if it does not, meaning its face value is always a dollar, regardless of the actual cost.
For instance, a buyer who purchases a contract for two cents risks only two cents, yet Kalshi's reporting method counts it as a dollar of volume, inflating the figure. In August, the divergence between these two methods across the exchange was three and a half times, as the average contract cleared at 28.6 cents.
To qualify as a swap under the Commodity Exchange Act, a contract must yield a payout based on an event that is “associated with a potential financial, economic, or commercial consequence.” The interpretation of the term “associated” is central to this ongoing debate.
In April, a divided Third Circuit interpreted this term broadly, allowing Kalshi to continue its trading operations in New Jersey.