A unanimous Ninth Circuit panel held that Kalshi's sports event contracts are bets rather than swaps, directly contradicting the Third Circuit's April decision. The CFTC says only the Supreme Court can settle it now.
The Ninth Circuit ruled on Friday that Kalshi's sports event contracts are bets rather than swaps, and that Nevada is entitled to regulate them under its gambling laws.
The unanimous three-judge panel affirmed a district court's decision to dissolve the preliminary injunction that had been shielding the prediction market from the Nevada Gaming Control Board. That board sent Kalshi a cease-and-desist letter in 2025 demanding it stop offering sports and election contracts in the state, with criminal and civil charges held out as the alternative. Kalshi sued, won its injunction, and then lost it again when the district court reversed itself following a ruling against Crypto.com. Friday's opinion leaves the company outside Nevada with a federal appeals court on record saying the state was entitled to push it out.
The panel did not reject federal preemption wholesale. It accepted that the Commodity Exchange Act preempts state regulation of swaps traded on a designated contract market, which is the argument Kalshi has built its national litigation strategy around. What it would not accept is that a contract on the outcome of a football game is a swap. "We conclude that Kalshi has not shown a likelihood that the CEA preempts state gaming regulations as applied to its sports event contracts and that the district court did not abuse its discretion by dissolving the injunction," the court wrote. The contracts were not swaps, in the panel's reading, because they were sports bets.
In April the Third Circuit reached the opposite conclusion, telling New Jersey it had no business regulating the same company. Two federal appeals courts now hold incompatible positions on whether a CFTC-registered exchange can be policed by state gaming boards, and the commission said so within hours.
"The Ninth Circuit has now teed up a circuit split that calls out for resolution by the Supreme Court," agency spokesman Zach Fulton said in an emailed statement. "A derivative contract structured as a swap is a swap regardless of the underlying subject matter; the only exceptions in statute are onions and movie box office receipts. The Ninth Circuit erred today when it invented a new and atextual exception to the CEA."
The onions are not a rhetorical flourish. The Onion Futures Act of 1958 still bans futures trading on onions, and Dodd-Frank added motion picture box office receipts to the exclusion list in 2010. Fulton's argument is that Congress knows how to carve something out of the Commodity Exchange Act when it wants to, and has never carved out sport. The Ninth Circuit's answer was that no statutory exclusion was needed, because a bet was never a swap to begin with.
Kalshi read the ruling more charitably. "The Ninth Circuit agreed with the Third Circuit on a fundamental point: Federal law prevents states from regulating trading on a federally licensed exchange, like Kalshi," spokesperson Dani Lever said. She added that the company still believes CFTC regulations as written do not prohibit sports contracts, that the agency is working to clarify them, and that Kalshi will seek further review. That is an accurate description of the preemption holding and a generous one about everything else, since the panel's entire reasoning turns on these contracts falling outside the swap definition in the first place.
Nevada was less equivocal. "This completely vindicates what we have been saying all along," Gaming Control Board Chairman Mike Dreitzer said in a statement that also named Robinhood and Crypto.com. "This is sports betting and needs to be properly regulated by the state." The American Gaming Association, whose members pay the state gaming taxes that prediction markets do not, called the decision "a big loss for Kalshi and other backdoor sports gambling operations who defy state laws."
The fight has been escalating all year. CFTC Chair Michael Selig has said repeatedly that the agency holds exclusive jurisdiction over prediction markets, sports included, and the commission has taken to suing states rather than waiting to be sued. It ordered Kalshi to keep trading through New York's $36 billion action earlier this month and has floated a framework for regulating event contracts outright. States have carried on filing regardless, with Connecticut adding a suit this week. The commercial stakes have grown alongside the legal ones: Gemini won exclusive rights to Apex's crypto event contracts in August, and Robinhood has run a prediction market hub since last year.
Kalshi had already withdrawn from Nevada before Friday, so the immediate operational damage is small. The precedent is not. Regulators elsewhere have reached the same destination by narrower routes — Korean authorities cut off Polymarket over a rainfall contract — but until now no US appeals court had told a federally registered exchange that a state gaming board outranks it. The election contracts half of the Nevada case was remanded for further consideration, which means the Ninth Circuit is not finished with Kalshi either.
