A new federal appeals court ruling has dealt a setback to Kalshi and widened the legal uncertainty surrounding sports event contracts, setting up a potential conflict that could eventually reach the U.S. Supreme Court.
The U.S. Court of Appeals for the Ninth Circuit unanimously rejected Kalshi’s argument that Nevada lacks the authority to regulate its sports-related prediction contracts. The decision represents a significant development in the ongoing dispute between prediction markets and state gambling regulators.
The three-judge panel concluded that the Commodity Exchange Act likely does not prevent Nevada from applying its gaming laws to Kalshi’s sports contracts. The court also disagreed with Kalshi’s position that the contracts should be classified as swaps and therefore fall exclusively under the Commodity Futures Trading Commission’s oversight.
Instead, the judges determined that the contracts at issue were sports wagers rather than swaps under federal commodities law.
Conflicting Federal Court Decisions
The ruling leaves the broader legal question unresolved because another federal court previously reached a different conclusion.
In April, a federal judge ruled that New Jersey could not regulate Kalshi’s event contracts. The conflicting decisions have now created a divide within the federal court system over whether states can apply their gambling laws to prediction markets operating under federal oversight.
That disagreement could increase the chances that the Supreme Court will eventually be asked to provide a nationwide interpretation.
CFTC spokesperson Zach Fulton criticized the Ninth Circuit’s decision, arguing that the panel had misunderstood the Commodity Exchange Act. He maintained that a derivative contract structured as a swap should remain a swap regardless of the subject covered by the contract, except for the narrow exclusions specifically listed in federal law.
Fulton said the court had effectively created an exception that is not supported by the wording of the CEA.
Nevada Claims Victory
Nevada regulators have challenged prediction market operators since 2025, arguing that sports event contracts amount to gambling and therefore fall under state gaming laws.
Although Kalshi has already withdrawn from Nevada and some other jurisdictions following regulatory actions, state officials said the latest ruling supports their interpretation.
Mike Dreitzer, chairman of the Nevada Gaming Control Board, said the decision confirms the state’s view that Kalshi’s products constitute sports betting and should be regulated under Nevada law.
The court’s discussion also included sports-related contracts offered through Robinhood and Crypto.com, giving the case possible implications for other platforms entering the prediction market space.
Kalshi Plans to Keep Fighting
Kalshi pointed to a separate portion of the ruling that it considers favorable.
Dani Lever, a spokesperson for Kalshi, said the Ninth Circuit agreed with the Third Circuit on the principle that states cannot regulate trading conducted on federally licensed exchanges.
However, the company continues to challenge the conclusion that its sports contracts can be regulated as gambling under state law.
Kalshi argues that current CFTC rules do not prohibit sports-related contracts and said the agency is working on regulatory changes that could provide additional clarity.
The company said it plans to seek further judicial review.
Prediction Markets Remain Under Pressure
The Ninth Circuit case is one part of a much broader legal battle involving prediction markets and state regulators across the country.
Kalshi and other companies in the sector have faced lawsuits and enforcement actions in numerous jurisdictions. Connecticut filed another case earlier this week, adding to the growing legal workload facing the industry.
The CFTC is pursuing separate legal actions as well. The federal regulator has argued in several cases that federal law gives it exclusive authority over Kalshi and similar prediction market platforms.
The traditional sports betting industry welcomed the appeals court ruling. The American Gaming Association called it a victory for consumer protections and state revenues, while arguing that Kalshi and similar platforms are effectively offering sports wagering without complying with state gambling regulations.
The competing federal court rulings leave a key question unanswered: whether sports event contracts offered by federally regulated prediction exchanges can also be treated as state-regulated gambling. Further appeals, and potentially Supreme Court intervention, may now be needed to resolve the dispute.
