Key Points
- The Ninth Circuit determined Nevada possesses authority to oversee Kalshi’s sports event contracts
- Judges classified Kalshi’s offerings as sports wagering rather than “swaps” governed by federal commodities regulations
- This decision contradicts an earlier April judgment preventing New Jersey from regulating Kalshi, establishing a circuit split
- The CFTC maintains it holds exclusive authority over prediction markets and claims the court misinterpreted statutory language
- Both legal analysts and the CFTC anticipate the U.S. Supreme Court will ultimately need to resolve the conflict
A federal appellate tribunal has delivered a setback to prediction market operator Kalshi, determining that Nevada possesses regulatory authority over the platform’s sports betting offerings. This judgment intensifies legal challenges facing an industry experiencing rapid expansion while confronting enforcement actions across numerous jurisdictions.
The U.S. Court of Appeals for the Ninth Circuit delivered its unanimous decision Friday. All three judges on the panel concluded that Kalshi failed to demonstrate that federal statutes prevent Nevada from enforcing its gaming regulations against the company’s sports-related contracts.
The Court’s Reasoning
According to the judicial panel, Kalshi’s sports event contracts most likely constitute sports gambling under Nevada statutes rather than “swaps” subject to the federal Commodity Exchange Act. This legal classification carries significant implications because swaps operate within the Commodity Futures Trading Commission’s regulatory domain.
The appellate court stated: “The CEA likely does not preempt Nevada’s gaming regulations as applied to Kalshi’s sports event contracts.”
Nevada authorities issued a cease-and-desist directive to Kalshi in 2025, demanding the platform discontinue offering election and sports event contracts to state residents. Kalshi responded with legal action against Nevada, requesting an injunction to maintain operations. Initially, a district court approved the injunction before later reversing course and dissolving it. The Ninth Circuit affirmed that dissolution.
Kalshi has since withdrawn from Nevada along with additional states that issued comparable regulatory orders.
Conflicting Appellate Decisions
This determination stands in stark contrast to an April decision where another federal appellate court barred New Jersey from imposing regulations on Kalshi. These contradictory conclusions establish what legal scholars term a circuit split.
The CFTC contends the Ninth Circuit fundamentally misunderstood the statutory framework. Agency spokesperson Zach Fulton stated the decision “invented a new and atextual exception” to federal commodities legislation. He noted the matter is now “teed up for resolution by the Supreme Court.”
CFTC Chair Michael Selig has publicly asserted the agency maintains “exclusive jurisdiction” over prediction markets, encompassing sports-related contracts. The regulatory body has initiated litigation against multiple states defending this jurisdictional claim.
Nevada Gaming Control Board Chairman Mike Dreitzer characterized the ruling as validation of state authority. “This is sports betting and needs to be properly regulated by the state,” he declared.
Kalshi contested the court’s conclusion. Company spokesperson Dani Lever stated the organization maintains its position that federal regulations don’t prohibit sports contracts and emphasized the CFTC’s efforts to provide regulatory clarity. Kalshi announced intentions to pursue additional review.
The American Gaming Association, representing established sportsbook operators, applauded the decision. The organization described it as “a big loss for Kalshi and other backdoor sports gambling operations who defy state laws.”
Connecticut initiated fresh litigation against Kalshi this week, expanding the roster of ongoing state enforcement actions. Given federal courts are now reaching contradictory determinations, Supreme Court intervention appears increasingly probable.
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