Kalshi Loses Nevada Appeal as Ninth Circuit Rejects Sports Market Preemption Claim

SAN FRANCISCO – The Ninth Circuit upheld Nevada’s ability to enforce state gambling laws against Kalshi’s sports-related event contracts.

The unanimous ruling keeps Nevada’s restrictions in place and creates a direct appellate split over whether states or federal regulators control sports prediction markets.

The three-judge panel on Aug. 28 affirmed a Nevada federal court’s decision to dissolve a preliminary injunction that had prevented state gaming regulators from acting against Kalshi. In its published opinion, the Ninth Circuit held that Kalshi had not shown it was likely to establish that the Commodity Exchange Act preempts Nevada gambling laws as applied to its sports contracts.

Ninth Circuit Rejects Kalshi’s Preemption Argument

Kalshi operates a designated contract market regulated by the Commodity Futures Trading Commission and has argued that its sports event contracts fall within the CFTC’s exclusive federal jurisdiction. Nevada has taken the opposite position, treating the products as sports wagering that requires a state gaming license.

The Ninth Circuit rejected Kalshi’s broad interpretation of the Commodity Exchange Act’s definition of a swap. The panel said the substance of its sports products amounts to sports gambling and noted that users can take positions comparable to point spreads, proposition bets and multi-leg parlays available through conventional sportsbooks.

The judges also found that federal rules governing event contracts did not support Kalshi’s position. The court concluded that CFTC Regulation 40.11 prohibits the listing of event contracts based on gaming and said Kalshi’s self-certification of its sports contracts did not override that restriction.

The ruling also rejected Kalshi’s claims of conflict and field preemption. The panel said the company could comply with Nevada law through measures such as geofencing and found that state regulation of gambling can coexist with the federal commodities framework.

Third Circuit Reached Opposite Conclusion

The decision conflicts with an April ruling from the Third Circuit in Kalshi’s dispute with New Jersey. That court affirmed a preliminary injunction protecting Kalshi, finding that its sports event contracts were likely swaps subject to the CFTC’s exclusive jurisdiction and that New Jersey’s gambling laws were preempted.

Both cases arose at the preliminary-injunction stage, rather than from final judgments on the underlying claims, but the appellate courts adopted sharply different readings of the federal law. The split increases the possibility that the regulatory dispute could eventually require Supreme Court review as similar cases move through courts around the country.

The Ninth Circuit decision comes as the broader fight over prediction markets intensifies. Commercial casinos, tribal gaming groups and state regulators have increasingly challenged sports event contracts, while the CFTC has backed the argument that federally regulated exchanges should not face separate state gambling regimes.

Election Contracts Return to Nevada Court

The Ninth Circuit’s ruling does not resolve every part of Kalshi’s Nevada case. The panel affirmed the dissolution of the injunction for sports-related contracts but sent the dispute over election contracts back to the district court for further consideration.

Kalshi is simultaneously fighting state enforcement elsewhere, including a recent appeal involving Connecticut’s attempt to regulate its prediction markets. Those proceedings mean federal courts in several jurisdictions are now considering variations of the same question over the boundaries between commodities regulation and traditional state gambling authority.

For Nevada, the Ninth Circuit ruling leaves the state free to continue enforcing its gaming laws against Kalshi’s sports contracts while the litigation proceeds. The remaining election-contract issues will now return to the federal district court.

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