Prediction Market Licensing Fight Creates a Compliance Template for EMIs Eyeing Stablecoin Settlement
The Third Circuit held in April that Kalshi's sports event contracts are swaps under the Commodity Exchange Act, giving the CFTC exclusive jurisdiction and shielding the platform from New Jersey's gambling laws. Four months later, the Ninth Circuit reached the opposite conclusion, ruling that the same contracts likely fall outside federal protection and that Nevada may enforce its gaming statutes. The circuit split is headed for the Supreme Court. But the operational lesson is already visible: platforms that move value through non-traditional instruments face licensing uncertainty that cannot be resolved by waiting.
The prediction market dispute turns on a question familiar to any EMI product team evaluating stablecoin settlement: does facilitating value transfer in a new format trigger licensing obligations beyond existing authorisations? For Kalshi, the format is an event contract that functions like a bet. For a European EMI, the format might be a euro-denominated e-money token used for cross-border settlement. In both cases, the regulatory architecture question is the same: when does innovation in value transfer become a regulated activity requiring additional authorisation?
In the United States, the answer remains fractured. The CFTC has filed amicus briefs in multiple circuits asserting exclusive jurisdiction over prediction markets, arguing that event contracts traded on designated contract markets are swaps beyond the reach of state gambling regulators. The agency sued Arizona, Connecticut, and Illinois in April 2026, claiming federal preemption. Yet the Ninth Circuit's August ruling rejected that position for sports contracts, concluding that Kalshi's offerings function as wagers rather than derivatives. At least four states. Nevada, Massachusetts, Michigan, and Washington, have now obtained court orders restricting Kalshi's activities.
The regulatory fragmentation extends to crypto payment facilitation more broadly. Under FinCEN guidance dating to 2019, businesses that receive virtual currency for purposes of transmission qualify as money transmitters subject to federal BSA registration and state licensing. The Conference of State Bank Supervisors has pushed for harmonisation through the Money Transmission Modernization Act, which 31 states had adopted in whole or in part by February 2026. But harmonisation is not uniformity. States that adopted the MTMA introduced significant deviations, some expanding the scope of money transmission to explicitly include virtual currency, others maintaining exclusions absent from the model text.
The GENIUS Act, signed into law in July 2025, created a federal framework for payment stablecoins that expressly preempts state money transmitter licensing requirements for permitted payment stablecoin issuers operating through federal pathways. But the preemption is narrower than it appears. State qualified issuers below a $10 billion threshold remain subject to home-state regulation, and the Act does not preempt state consumer protection laws. The practical effect is a two-tier system where the largest issuers escape state-by-state licensing while smaller entrants face continued fragmentation.
For European EMIs, the architecture question looks different but leads to the same decision tree. Under MiCA, e-money tokens, stablecoins pegged to a single official currency, can only be issued by credit institutions or authorised electronic money institutions. An EMI license is necessary but not sufficient; issuers must also satisfy MiCA's white paper notification, reserve segregation, and redemption-at-par requirements. The EMI authorisation establishes the right to issue e-money; the MiCA layer governs the token as a crypto-asset. Building a stablecoin means building an EMI first, then layering MiCA's token-specific obligations on top.
This sequencing is the critical insight for payment institutions evaluating expansion. MoonPay secured an EMI licence from De Nederlandsche Bank in September 2026, becoming one of the few Dutch firms to hold both a MiCA crypto-asset service provider authorisation and an EMI licence in a single entity. The combination enables euro stablecoin issuance, payment accounts, and card products across the EEA, capabilities unavailable to firms that pursued only one authorisation. Circle took a similar path, obtaining an EMI licence in France in 2024 that covers both USDC and EURC for EU distribution.
The competitive dynamic is accelerating. Banking Circle, a Luxembourg payment institution with CASP authorisation, positions EURI as settlement infrastructure for banks. Quantoz Payments, a Dutch EMI supervised by De Nederlandsche Bank, received MiCA authorisation for both euro and dollar stablecoins in late 2024. Membrane Finance, Revolut's Bridge subsidiary, and StablR have each built on EMI foundations to offer MiCA-compliant euro tokens. The infrastructure layer is no longer theoretical.
What the prediction market litigation clarifies is the cost of architectural ambiguity. Kalshi obtained a CFTC licence as a designated contract market in 2020, operated under the assumption that federal authorisation preempted state regulation, and now faces enforcement actions in multiple jurisdictions after two appellate courts disagreed on the scope of that protection. The platform's compliance architecture was built on a regulatory interpretation that proved unstable.
EMIs contemplating stablecoin settlement face an analogous choice. The question is not whether to add crypto capabilities, institutional clients are already demanding them, but whether to build, partner, or pursue additional licensing. Building on an existing EMI licence without MiCA compliance creates exposure to the same architecture risk Kalshi encountered: regulators may later conclude that the activity required authorisation the platform did not hold. Partnering with a licensed issuer shifts the regulatory burden but limits product control. Pursuing dual authorisation requires capital, time, and regulatory engagement, but delivers the operational flexibility competitors are already deploying.
The circuit split in the United States will eventually reach resolution. The European framework, by contrast, is settled: stablecoin issuance requires both EMI status and MiCA compliance, and the firms that secured both are already capturing institutional settlement flows. For EMIs still weighing the decision, the prediction market precedent offers a cautionary template: regulatory architecture is not a product roadmap item to be sequenced after launch. It is the foundation on which defensible expansion depends.
References
[4] Gibson Dunn, "The GENIUS Act: A New Era of Stablecoin Regulation," November 2025
[5] White & Case, "MiCA Regulation: New regulatory framework for Crypto-Assets Issuers,"
