The Ninth Circuit has ruled that Kalshi’s sports event contracts are gambling, not federally protected swaps. The decision directly contradicts the Third Circuit’s April ruling in Kalshi’s favour. A circuit split now makes Supreme Court review almost certain.
The Ninth Circuit ruled on 28 August 2026 that Kalshi’s sports event contracts are sports gambling, not federally regulated swaps under the Commodity Exchange Act. The unanimous 3-0 decision clears Nevada to enforce state gambling laws against the prediction market. The ruling conflicts with the Third Circuit’s April decision favouring Kalshi, setting up a likely Supreme Court showdown.
- What the Ninth Circuit Decided
- How the Third Circuit Ruling Differs
- Why the Circuit Split Matters
- What Happens Next
The Ninth Circuit has ruled that Kalshi’s sports event contracts are sports gambling, not federally protected swaps. The unanimous 3-0 decision, handed down on 28 August 2026, clears Nevada to enforce state gambling laws against the prediction market. U.S. Circuit Judge Ryan D. Nelson wrote the 50-page opinion. All three judges on the panel — Nelson, Kenneth Kiyul Lee, and Bridget Bade — were appointed by President Trump. The ruling is a direct reversal of the Third Circuit’s 2-1 decision in April, which found that federal law preempted New Jersey’s gambling regulations. That circuit split makes Supreme Court review almost certain. Polymarket traders now price the odds of SCOTUS granting certiorari at 64%, up from roughly 30% before the ruling. The case began when the Nevada Gaming Control Board sent Kalshi a cease-and-desist letter earlier this year. Kalshi sought a preliminary injunction, arguing the Commodity Exchange Act gave the CFTC exclusive jurisdiction over its platform. The district court initially granted the injunction, then reversed itself. Kalshi appealed. The Ninth Circuit has now affirmed the district court’s reversal. The opinion is scathing. Nelson called Kalshi’s argument “disingenuous” and said its claim that event contracts differ from sportsbook wagers “strains credulity.” He invoked Shakespeare’s Romeo and Juliet: to call a rose by any other name would smell as sweet. “The substance of the sports event contracts offered on Kalshi’s DCM is sports gambling, regardless of whether Kalshi calls them swaps,” Nelson wrote.
What the Ninth Circuit Decided
The panel rejected Kalshi’s core argument on every front. Kalshi claimed its sports event contracts were “swaps” under the Commodity Exchange Act. The CEA grants the CFTC exclusive jurisdiction over swaps traded on designated contract markets. If Kalshi’s contracts qualified, Nevada could not regulate them. Nelson disagreed. He found that the CEA’s definition of swap, even read broadly, does not cover sports event contracts. The judge pointed to a provision in the CEA that explicitly bars prediction markets from listing contracts tied to “terrorism, assassination, war, gaming, or an activity that is unlawful under any State or Federal law.” That language, Nelson wrote, has “traditionally been interpreted as mandatory direction.” Congress did not intend to upend decades of state gambling regulation through a Wall Street reform bill. Nelson also dismantled Kalshi’s claim that it merely facilitates trades rather than taking the opposing side of wagers. In a footnote, the opinion noted that Kalshi’s trading affiliate acts as a market maker. Kalshi removed references to “Kalshi Trading” from its “Who Are You Trading With” page shortly after Nevada filed its brief. The timing was not lost on the court. The panel also rejected Kalshi’s argument that complying with both Nevada law and the CEA was impossible. Nelson pointed out that regulated entities in Nevada already use geofencing. Kalshi could do the same. It simply refuses to. The court affirmed the dissolution of the preliminary injunction for sports event contracts. It remanded the case to the district court to consider Nevada’s challenges to Kalshi’s election contracts. Those are a fraction of Kalshi’s business but remain illegal under Nevada law. The Ninth Circuit’s jurisdiction covers 11 states and territories: Nevada, Alaska, Arizona, California, Hawaii, Idaho, Montana, Oregon, Washington, Guam, and the Northern Mariana Islands. No circuit court covers more ground. The ruling gives every state in that footprint a legal template for action.
How the Third Circuit Ruling Differs
The Third Circuit reached the opposite conclusion on 6 April 2026. In a 2-1 decision, the court found that the CEA likely preempted New Jersey’s gambling laws. Judge David J. Porter, also a Trump appointee, wrote the majority opinion. He noted that the CFTC had chosen not to enforce its regulations against Kalshi’s sports markets. That non-enforcement, Porter argued, suggested the contracts fell within federal jurisdiction. The dissenting judge disagreed. The Ninth Circuit’s Nelson addressed the Third Circuit’s reasoning directly. He said both courts agreed on one point: federal law prevents states from regulating trading on a federally licensed exchange. Where they diverged was on whether Kalshi’s contracts were actually “swaps” under the CEA. The Third Circuit assumed they were. The Ninth Circuit found they were not. That factual disagreement is what creates the circuit split. Kalshi spokesperson Dani Lever seized on the common ground. She said both circuits agree that “federal law prevents states from regulating trading on a federally licensed exchange, like Kalshi.” However, she acknowledged the Ninth Circuit’s adverse ruling and said the company would seek “further review.” New Jersey now faces a deadline. The state must decide by 3 September whether to petition the Supreme Court for certiorari. If New Jersey does not appeal, the Third Circuit’s ruling stands in its jurisdiction. The Ninth Circuit’s ruling stands in its much larger footprint. The result would be a patchwork: Kalshi legal in the Northeast, illegal across the West. That is precisely the kind of interstate inconsistency the Supreme Court exists to resolve.
Why the Circuit Split Matters
Circuit splits are the Supreme Court’s primary trigger for review. When two federal appeals courts reach opposite conclusions on the same legal question, the high court almost always steps in. The prediction markets question is now a textbook example. Twenty states are in active litigation over whether prediction markets can be regulated at the state level. Last month, 44 states signed a letter to the CFTC arguing the agency lacks authority over sports-related event contracts. The Ninth Circuit’s ruling strengthens the states’ hand. Nevada Gaming Control Board Chairman Mike Dreitzer called the decision a complete vindication. “This is sports betting and needs to be properly regulated by the state,” he said. “We will continue to vigorously enforce Nevada law to safeguard gaming in our state.” Nevada regulators have already sought fines of $120,000 per day for each day Kalshi has not implemented a third-party geolocation platform. The ruling green-lights that enforcement. Arizona is watching closely. A federal district judge in May granted Kalshi a permanent injunction barring Arizona from pursuing criminal charges. Arizona Attorney General Kris Mayes said her office is reviewing Nelson’s opinion. She called Kalshi’s position an attempt to “federalize sports betting regulation nationwide” and “sweep aside decades of state and Tribal oversight.” The American Gaming Association also weighed in. CEO Bill Miller called the ruling “a significant win for consumer protections and taxpayers” and “a big loss for Kalshi and other backdoor sports gambling operations who defy state laws.” The tribal gaming angle is equally significant. Tribal compacts in multiple Ninth Circuit states grant exclusivity over sports betting. If federally regulated prediction markets can operate nationwide without state licences, those compacts lose value. The Indian Gaming Association has been vocal on this point. The circuit split puts all of that at risk until the Supreme Court settles the question.
What Happens Next
Kalshi has said it will seek further review. The most likely path is a petition for rehearing en banc at the Ninth Circuit, followed by a Supreme Court petition if that fails. The company is also counting on the CFTC. The commission proposed new rules earlier this year that would explicitly allow prediction markets to offer sports contracts, with restrictions on player injuries, official rulings, fights, youth events, and certain in-game actions. If the CFTC finalises those rules before the Supreme Court acts, the legal landscape shifts again. However, the Ninth Circuit’s opinion suggests CFTC rules may not save Kalshi. Nelson’s analysis focused on the CEA’s statutory text, not just current regulations. Even if the CFTC changes its rules, the court found the underlying statute does not cover sports event contracts. That means a regulatory fix might not be enough. Donald Trump Jr. adds a political dimension. He became an advisor to Kalshi shortly after his father’s second term began. Reports indicate he received a $300,000 equity stake. With Kalshi valued at $22 billion after a $1 billion funding round this spring, those holdings are now worth millions. The Trump administration has generally supported prediction markets and backed CFTC authority over the sector. However, all three Ninth Circuit judges were Trump appointees. Their ruling was unanimous and harsh. That suggests judicial interpretation of the CEA may not align with the administration’s policy preferences. The Supreme Court could hear the case as early as the 2026-2027 term. If certiorari is granted, a decision would likely come by mid-2027. Until then, prediction markets face a legal patchwork. Legal in New Jersey. Illegal in Nevada. Uncertain everywhere else. For ongoing coverage of prediction markets litigation and regulatory developments, AGBrief tracks the sector closely.
Frequently Asked Questions
What did the Ninth Circuit rule on Kalshi?
The Ninth Circuit ruled unanimously that Kalshi’s sports event contracts are sports gambling, not federally regulated swaps under the Commodity Exchange Act. The court affirmed Nevada’s right to enforce state gambling laws against the prediction market and dissolved Kalshi’s preliminary injunction.
How does this differ from the Third Circuit ruling?
The Third Circuit ruled 2-1 in April 2026 that the CEA likely preempts New Jersey gambling laws, allowing Kalshi to operate. The Ninth Circuit reached the opposite conclusion. Both courts agreed federal law prevents states from regulating federally licensed exchanges, but disagreed on whether Kalshi’s contracts qualify as swaps.
Will the Supreme Court hear this case?
A circuit split makes Supreme Court review highly likely. Polymarket traders price the odds of SCOTUS granting certiorari at 64%, up from roughly 30% before the ruling. New Jersey must decide by 3 September whether to petition the Supreme Court.
What did Judge Nelson say about Kalshi’s argument?
Judge Nelson called Kalshi’s claim that event contracts differ from sportsbook wagers “disingenuous” and said the argument “strains credulity.” He invoked Shakespeare’s Romeo and Juliet, writing that the substance of Kalshi’s contracts is sports gambling regardless of what they are called.
What states does the Ninth Circuit ruling affect?
The Ninth Circuit covers Nevada, Alaska, Arizona, California, Hawaii, Idaho, Montana, Oregon, Washington, Guam, and the Northern Mariana Islands. The ruling gives all jurisdictions in that footprint a legal template to enforce gambling laws against prediction markets.
What is Kalshi’s next legal move?
Kalshi has said it will seek further review, likely starting with a petition for rehearing en banc at the Ninth Circuit. The company is also counting on the CFTC to finalise proposed rules allowing prediction markets to offer sports contracts, though the court’s statutory analysis suggests regulatory changes may not resolve the underlying legal question.
This article has been thoroughly researched and reviewed by the CasinoBait editorial team to ensure accuracy and relevance for Asian casino players.
