SCOTUS AI Copyright Cert Grant: BUY NO at 24 cents
· By Tyler James Webber
Kalshi's "Will the SCOTUS hear a case about AI and copyright law" trades at 24 cents YES. Working fair value is 7% based on three sequential pipelines (Doe 1 v. GitHub, Raw Story v. OpenAI, Thomson Reuters v. ROSS) plus a surprise term. Edge is 17pp before Rule 6.3(c) drag, 16pp after. Small NO position recommended.
Position. BUY NO at 24 cents on Kalshi's KXSCOTUSAICOPYRIGHT-27JAN contract. Small size.
Working fair value (the probability of a clean YES resolution) is 7%, with a defensible range of 2 to 24% under one-step adverse stress. Headline edge is 17pp. Rule 6.3(c) settlement at last traded price is a distinct third resolution channel that discounts the effective edge to NO holders by roughly 1pp.
Conviction. 4/10. Data quality - 5, model confidence - 6, completeness - 6, edge robustness - 2.
Key date. January 1, 2027 (resolution). Platform. Kalshi. Volume. $7,760.
The contract resolves YES if the Supreme Court grants a writ of certiorari to a case about AI and copyright law before January 1, 2027. Resolution requires three sequential events: a circuit court must decide an AI and copyright case, the losing party must file a cert petition, and the Court must grant cert before the deadline. The contract resolves on the cert grant itself (SCOTUS agrees to hear the case), not on a merits decision from the court.
Resolution Mechanics. The Source Agency is the Supreme Court of the United States, and cert grants are published through the orders list. The factual question of whether cert was granted is unambiguous. The interpretive question is whether a granted case is about AI and copyright law within the meaning of the contract. Kalshi's resolution rules supply three outcomes. Beyond clean YES and clean NO, Rule 6.3(c) authorizes settlement at the last traded price when the Outcome Review Committee deems the question objectively ambiguous. A SCOTUS cert grant where AI is featured but the doctrinal question is procedural could trigger 6.3(c) rather than a clean YES.
Current Odds. YES trades at 24 cents, NO at 82 cents. Volume is thin at $7,760.
Price Movement. The contract opened at 40% in March 2025, traded down to a trough of 16% in late 2025 and early 2026, and has since climbed back to 24% as of early May 2026. Two events drove most of that movement. First, on March 2, 2026, the Supreme Court declined to hear Thaler v. Perlmutter, the only AI copyright case then pending before it. Second, the Third Circuit's schedule for the ROSS appeal became public, showing oral argument set for June 2026, too late to plausibly produce a decision and cert petition before the contract's January 1, 2027 deadline. The current 24% represents a price reactive to real news.
Expert Predictions. Practitioner commentary runs cool on a 2026 cert grant. The Kluwer Copyright Blog characterized the Third Circuit's June 2025 acceptance of the ROSS interlocutory appeal as making it the first appellate court to weigh in on AI fair use, framing a circuit decision as the threshold step before any Supreme Court engagement. A November 2025 amicus brief filed in ROSS called Judge Bibas's fair use analysis unsound. Daniel Healy of Brown Rudnick noted in March 2025 that more than 25 lawsuits brought by copyright holders against AI companies are pending in federal court, with most still currently at the district court level. The consensus framing is that ROSS will be the first appellate test, with Supreme Court engagement deferred to a subsequent term.
Crowd Narrative. The 24% level reflects three implicit beliefs: (1) the resolution criteria will be read broadly enough to capture DMCA-procedural cases, (2) that one of the live circuit cases will produce a decision in time for an expedited cert petition, and (3) that the Court's appetite for AI cert is meaningfully higher than baseline. The gap between practitioner commentary and the 24% market price suggests the market may be overweighting an unobservable upside.
Position. BUY NO at 24 cents. Fair value 7%, edge 17pp, conviction 4/10.
The analysis builds three independent sequential pipelines plus a residual surprise term. Conditional on a cert grant in a borderline-AI case, the resolution is itself three-state: clean YES under a natural-language reading, clean NO under a narrow doctrinal reading, or Rule 6.3(c) settlement. The qualification probability below specifically means probability of clean YES conditional on grant.
Pipeline A. Doe 1 v. GitHub (Ninth Circuit). DMCA Section 1202(b) identicality applied to AI training data. Oral argument February 11, 2026; decision plausible August through December 2026. P(decision by September 30) = 50%, P(timely cert petition) = 60%, P(qualifying cert grant) = 2.8% (5% grant probability times 55% qualification). Pipeline A: 0.50 × 0.60 × 0.028 = 0.84%.
Pipeline B. Raw Story v. OpenAI (Second Circuit). Article III standing under TransUnion v. Ramirez (2021) for DMCA CMI claims. Oral argument March 18, 2026. P(decision) = 45%, P(petition) = 55%, P(qualifying grant) = 3.0%. Pipeline B: 0.45 × 0.55 × 0.030 = 0.74%.
Pipeline C. Thomson Reuters v. ROSS Intelligence (Third Circuit). AI training fair use. The strongest cert candidate by subject matter, but oral argument was set on April 14, 2026, for June 11, 2026. P(qualifying decision by September 30) = 10%, unusually fast for the Third Circuit on a complex IP appeal. P(timely petition) = 85%, P(qualifying grant) = 13%. Pipeline C: 0.10 × 0.85 × 0.13 = 1.11%.
Pipeline D. Surprise pathway. With practitioner counts above 50 active AI copyright cases by early 2026, an unobserved expedited appeal could surface. Residual = 1.5%.
Combined: 1 − (0.992)(0.993)(0.989)(0.985) ≈ 4.1% mechanical.
Holistic Calibration. Caldeira and Wright (1988) established that circuit splits are the dominant determinant of cert grants; in the absence of a split, grant rates fall to roughly 1% overall and 3 to 5% for paid petitions. Thaler v. Perlmutter followed in the Naruto v. Slater (2018) human-authorship lineage and rejected non-human authorship; training fair use and DMCA questions do not turn on whether the author was human, so the Thaler signal is doctrinally narrower than a uniform AI-aversion read implies. Top-down, the question reads as a 6-9% problem. Holistic estimate: 7%, calibration ratio 1.71.
Working fair value 7%, edge 17pp.
The dominant variable is the qualification probability under the resolution criteria, estimated at 50-55%. The table shows both Mechanical FV (pure pipeline product) and Holistic FV (after applying the 1.71 calibration ratio).
| Qualification Reading | Pipeline A | Pipeline B | Mechanical FV | Holistic FV | Edge | Position | |---|---|---|---|---|---|---| | Narrow (25%) | 0.38% | 0.37% | 3.3% | 4.0% | +20.0pp | BUY NO, larger size | | Base case (55%) | 0.83% | 0.82% | 4.2% | 7.0% | +17.0pp | BUY NO, small (current) | | Broad (85%) | 1.27% | 1.26% | 5.0% | 9.5% | +14.5pp | BUY NO, smaller size |
The position holds across the joint range. It does collapse under full one-step adverse stress (every node bumped favorably for YES simultaneously, producing stressed FV near 24%), which is the source of the 2/10 edge robustness score.
The dominant risk is a broad reading of the resolution criteria. A non-specialist resolution team could reasonably read "about AI and copyright law" to include any case where AI-generated material is the disputed conduct, regardless of whether AI is the controlling legal question.
A related risk is Rule 6.3(c) settlement. By the time 6.3(c) is invoked, the market would likely have moved to 75 to 85 cents on cert grant news. NO holders bought at 24 cents would receive back 15-25 cents per dollar staked, partial loss rather than full gain. Expected drag: roughly 1pp of effective edge.
A third risk is timing on Doe 1 v. GitHub. A Ninth Circuit ruling in late summer 2026 leaves enough window for an expedited petition before January 1, 2027. The narrow October Term 2026 (OT2026) cert window (roughly four months of conferences) is the binding constraint.
Ninth Circuit ruling in Doe 1 v. GitHub, August - December 2026. The first domino. Affirmance for AI defendants closes Pipeline A. Reversal creates a clean vehicle for cert.
Second Circuit ruling in Raw Story v. OpenAI, September 2026 - January 2027. Late timing constrains the cert window even with a favorable decision.
SCOTUS conferences and orders lists, October - December 2026. The bulk of OT2026 cert grants for cases that would resolve before January 1, 2027 will come from this window. No grant by the December 2026 conference effectively resolves NO.
The position is BUY NO at 24 cents. Working fair value is 7%, with the model range running 2 to 24% under formal stress and a narrower 4.0 to 9.5% under NMT sensitivity. The trade rests on three structural observations: the Thaler denial is an adverse but doctrinally narrow signal, the ROSS oral argument timing forecloses the strongest cert candidate from deciding in time, and the Doe 1 and Raw Story cases turn on DMCA-procedural questions where qualification under the resolution criteria is objectively contested.
The model indicates 7% probability of clean YES, but the market says 24%. The sober mid-range conditional on full stress runs 9-13%. The effective edge for NO holders is approximately 16pp after netting Rule 6.3(c) drag.
Sizing. Edge robustness 2/10 means the position fails at one-step adverse stress. Hold to small (25%) sizing. Add only on confirming catalysts (Ninth Circuit affirmance, no qualifying cert petitions on SCOTUSblog Petitions to Watch by November 2026). Reduce on disconfirming catalysts (Ninth Circuit reversal on AI-specific grounds, expedited Third Circuit ROSS ruling, or any cert grant in an adjacent AI copyright case).
Market: https://kalshi.com/markets/kxscotusaicopyright/scotus-ai-copyright/kxscotusaicopyright-27jan