The United States Court of Appeals for the Ninth Circuit affirmed a lower court’s ruling Friday, saying that Kalshi’s sports event contracts are sports bets, not “swaps” subject to exclusive Commodity Futures Trading Commission jurisdiction.
The ruling hands the Nevada Gaming Control Board its biggest court victory yet in the fight over prediction markets. The court panel affirmed the dissolution of Kalshi‘s preliminary injunction and left Nevada sports betting regulators free to enforce its gaming laws against Kalshi’s sports products.
The Ninth Circuit directly rejected the company’s core legal theory that CFTC registration and listing on a designated contract market shield sports contracts from state gambling regulation. An appeal by Crypto.com and request for injunctive relief from Robinhood were also rejected.
It also puts the court squarely at odds with the Third Circuit’s April decision protecting Kalshi in New Jersey. That kind of circuit split will likely lead to an eventual Supreme Court review.
Ninth Circuit backs Nevada
In the 3-0 opinion published by Judge Ryan Nelson, the court held that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over swaps traded on a designated contract market. However, it said not every transaction placed on such an exchange is a swap.
Kalshi’s sports contracts failed the threshold test, the court found. A contract on the outcome of a game, a point spread, a score, a player performance or a multi-leg combo does not qualify as a swap under the statute merely because a platform calls it an event contract or lists it on a CFTC-registered exchange.
The court wrote that Kalshi “has a gambling problem,” noting the company has marketed itself as “the first app for legal sports betting in all 50 states” while simultaneously arguing its sports betting products are not sports bets.
The opinion offered a simple comparison. A Caesars customer can bet on the Raiders to win by more than 7.5 points, while a Kalshi customer can buy a contract on the Raiders winning by more than 7.5 points. In each case, the customer risks money on an uncertain sporting outcome for a potential higher payout. The court concluded that both fit the ordinary definition of a wager.
“The substance of the sports event contracts offered on Kalshi’s DCM is sports gambling, regardless of whether Kalshi calls them swaps,” the panel wrote.
The court rejects preemption
Kalshi argued the CEA preempted Nevada gaming law in three ways: expressly, through a direct conflict between federal and state requirements, and because federal law occupied the entire field. The Ninth Circuit rejected all three arguments.
The court accepted Kalshi’s broader position that the CEA expressly preempts state regulation of actual swaps traded or executed on a designated contract market. But it found Kalshi’s sports contracts are not swaps because the statute refers to the occurrence or nonoccurrence of an event associated with a financial, economic or commercial consequence, not the result of a sporting contest.
The panel also rejected Kalshi’s claim that downstream economic effects for teams, advertisers, broadcasters and local communities transform sports outcomes into swaps. That interpretation would make the statute limitless, the court said, because virtually anything could be described as having some possible economic consequence.
AGA applauds Nevada
The American Gaming Association was quick to send out a statement from CEO Bill Miller applauding the NGCB for its work on the issue.
“The Ninth Circuit’s unanimous decision confirmed state and voter choices about sports betting in their communities,” Miller said. “The American Gaming Association applauds Nevada’s leadership for protecting and preserving the state- and tribal-regulated gaming framework. This ruling is a significant win for consumer protections and taxpayers.
“It is a big loss for Kalshi and other backdoor sports gambling operations who defy state laws.”
Nevada case history
The NGCB sent Kalshi a cease-and-desist letter last year alleging it was running an unlicensed sports pool in violation of state gaming statutes and regulations. Kalshi sued, and a federal district judge initially granted a preliminary injunction protecting the company from Nevada enforcement.
That early win did not last. After another federal judge in the District of Nevada denied Crypto.com’s request for similar relief, finding sports contracts were not swaps, Nevada asked the court to dissolve Kalshi’s injunction. The district court did so, concluding that Kalshi’s contracts were based on sports outcomes, not qualifying swaps.
The Ninth Circuit affirmed that result Friday. It also rejected Kalshi’s claim that geofencing Nevada would conflict with the CFTC’s “impartial access” requirement, noting that regulated gaming companies already use geolocation technology in the state and that Kalshi had not shown compliance would jeopardize its designated-contract-market status.
Other cases nationwide
The Nevada result adds weight to the state-regulator side of a national litigation map that remains inconsistent.
- Arizona and Tennessee: Kalshi has received preliminary relief in some other jurisdictions, while Ohio, Maryland and Washington have produced less favorable decisions or active enforcement pressure.
- Connecticut: A federal court denied Kalshi’s preliminary injunction against Connecticut regulators, and the state has since sued the company directly over alleged illegal, unlicensed sports betting.
- Michigan: A circuit court judge ruled Kalshi could not offer its sports contracts in the state, though the CFTC instructed Kalshi to go against part of the order requiring previously completed trades be refunded.
- Minnesota: A federal judge blocked Minnesota’s statutory prediction-market ban on preliminary grounds, finding federal preemption claims likely to succeed at least in part.
- New Jersey: The Third Circuit ruled for Kalshi, finding its sports contracts were federally regulated swaps and blocking state enforcement.
- New York: A federal judge denied Kalshi a preliminary injunction, allowing New York’s gambling enforcement effort to proceed while the company appeals.
- Utah: A federal court granted Utah summary judgment, holding the state can apply its anti-gambling laws to Kalshi’s sports contracts.
What happens next
Kalshi can seek panel rehearing, rehearing en banc or eventually petition the U.S. Supreme Court. The company now has an obvious reason to do so as the Ninth Circuit and Third Circuit have reached opposite conclusions on the central question of whether sports event contracts are swaps preempting state gaming laws.
For Nevada, the immediate consequence is simpler.
The NGCB can continue enforcing state gaming law against Kalshi’s sports contracts, subject to whatever further appellate relief Kalshi seeks. And now, the CFTC’s claim as the exclusive national regulator of sports prediction markets just suffered its most consequential defeat yet.
