The United States Court of Appeals for the Ninth Circuit has handed Nevada a major victory in its battle with prediction-market operators, ruling that the federal Commodity Exchange Act does not, at this stage, shield Kalshi’s sports-event contracts from the state’s gambling laws.
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In an opinion filed on August 28, 2026, a three-judge panel comprising Circuit Judges Ryan D. Nelson, Bridget S. Bade and Kenneth K. Lee affirmed in part a Nevada federal judge’s decision dissolving an injunction that had prevented state gaming regulators from taking enforcement action against Kalshi’s sports-related contracts.
The appellate court held that KalshiEX, LLC had failed to demonstrate a likelihood that the Commodity Exchange Act, CEA, pre-empts Nevada’s gaming regulations as applied to its sports-event contracts.
The ruling strengthens Nevada’s position that prediction-market products allowing customers to stake money on sporting outcomes are, in substance, sports betting and remain subject to state licensing and regulatory requirements.
Kalshi had maintained that it is a Designated Contract Market, DCM, registered with the Commodity Futures Trading Commission, and that its sports-event products are federally regulated contracts falling within the CFTC’s exclusive jurisdiction.
The company therefore argued that Nevada could not apply its gambling laws to the contracts.
The Ninth Circuit disagreed.
The court noted that although the CEA gives the CFTC exclusive jurisdiction over qualifying “swaps” traded or executed on a designated contract market, that protection depends on the transactions actually meeting the statutory definition of swaps.
The panel concluded that Kalshi’s sports-event contracts likely do not qualify because, in substance, they are sports bets.
Writing for the court, Judge Nelson pointed to Kalshi’s own description of itself as “the first app for legal sports betting in all 50 states.”
The court examined the range of contracts available on the platform, including wagers on who will win the Super Bowl, the first selection in an NFL Draft, point spreads, scores, over-under propositions and multi-leg parlays.
It noted that more than 90 per cent of Kalshi’s trades in 2025, accounting for 95 per cent of its revenue, were sports-related.
The judges rejected the suggestion that attaching the terminology of financial markets to such transactions altered their substance.
Using the example of a customer betting on whether the Las Vegas Raiders would win by more than 7.5 points, the court reasoned that the economic substance was essentially the same whether the transaction occurred at a traditional sportsbook or through a Kalshi event contract.
The court said Kalshi’s denial that its sports-event contracts were sports bets under the understanding of a reasonable person was “disingenuous.”
It added that the substance of the products was sports gambling regardless of the label attached to them.
Borrowing from Shakespeare, the court reasoned that just as a rose called by another name retains its essential character, placing sports bets under a different name remains gambling.
“Everyone, including Kalshi, knows it when they see it,” the court said in its discussion of the nature of the contracts.
The dispute originated after the Nevada Gaming Control Board sent Kalshi a cease-and-desist letter in March 2025, accusing it of operating an unlicensed sports pool contrary to Nevada gaming laws.
Nevada warned that continued operation could lead to civil or criminal enforcement.
Kalshi sued the Board, its members, Nevada and the state Attorney General, seeking an injunction preventing them from applying state law to its sports and election-event markets.
A district court initially granted Kalshi preliminary protection, but later reversed course and dissolved the injunction after another Nevada federal case involving Crypto.com concluded that contracts based on the outcome of live sporting events were not “swaps” under the CEA.
The Ninth Circuit has now upheld the dissolution of Kalshi’s protection as it relates to sports contracts.
The appellate judges also rejected Kalshi’s expansive interpretation of “excluded commodities.”
The court agreed with the district judge that one aspect of Kalshi’s interpretation did “not grammatically or logically make sense.”
Even if the contracts could otherwise fall within the excluded-commodity category, the court concluded that Kalshi had failed to satisfy the statutory requirement linking such commodities to a financial, commercial or economic consequence.
The court rejected all three forms of federal pre-emption argued by Kalshi — express pre-emption, conflict pre-emption and field pre-emption.
On field pre-emption, it stressed the longstanding role of individual states in regulating gambling and noted that Congress has expressly recognised that states bear primary responsibility for determining what forms of gambling may lawfully operate within their borders.
The judges said Congress did not use amendments to Wall Street regulation to quietly sweep away decades of federal, state and tribal gambling regulation.
Accepting Kalshi’s interpretation, the court said, would effectively assume that Congress had “hid an elephant in a mousehole.”
The Ninth Circuit concluded that while federal law pre-empts state regulation of actual swaps traded on CFTC-designated markets, Nevada’s statutes target gambling and unlicensed sports pools — an area the CEA has not displaced.
Kalshi also argued that complying with Nevada law would cause irreparable harm because it would have to geographically block Nevada residents, close out contracts and potentially put its federal DCM status at risk.
The court was unconvinced.
It said the costs of geofencing were unlikely to be prohibitively expensive for a company of Kalshi’s size and characterised other claimed harms as speculative or substantially self-inflicted.
The judges noted that Kalshi expanded its sports products despite being aware of potential conflict with state gaming laws and despite existing CFTC regulations concerning gaming contracts.
The court therefore found no abuse of discretion in the district judge’s conclusion that the balance of equities and public interest favoured Nevada’s ability to enforce its laws.
However, the decision does not finally resolve every issue involving Kalshi.
The Ninth Circuit specifically distinguished Kalshi’s election-event contracts from its sports products.
Because the district court had not determined whether Kalshi’s election contracts fit within the CEA’s definition of a swap, the appellate panel sent that aspect of the dispute back to the lower court for consideration.
The final disposition was therefore: “AFFIRMED IN PART AND REMANDED IN PART.”
Judge Kenneth Lee filed a concurring opinion. Although he substantially agreed with the majority’s interpretation of the Commodity Exchange Act, he noted that one statutory provision gave him pause because Congress appeared to give the CFTC some discretion over whether gaming contracts should be prohibited.
He concluded that the broader statutory question did not need to be definitively resolved at this stage because the existing federal regulation, 17 C.F.R. §40.11, currently prohibits gaming-related contracts of the type at issue.
The ruling also deepens an emerging division among American federal courts over the legal status of prediction markets.
While the Ninth Circuit has sided with Nevada, the Third Circuit previously upheld a New Jersey ruling granting Kalshi preliminary protection. An appeal from a Maryland decision was also pending before the Fourth Circuit when the Ninth Circuit delivered its judgment.
Federal district courts in Tennessee and Arizona have issued decisions favourable to Kalshi, while courts in Ohio and New York have taken positions more favourable to state regulators.
The growing divergence increases the possibility that the dispute over whether states may regulate sports-event prediction contracts could eventually reach the U.S. Supreme Court.
Nevada officials celebrated Friday’s ruling as vindication of their position.
Chairman of the Nevada Gaming Control Board, Mike Dreitzer, said the judgment confirmed the state’s longstanding argument that the products are sports betting and should be regulated accordingly.
“This completely vindicates what we have been saying all along. This is sports betting and needs to be properly regulated by the state,” Dreitzer said.
He said the Nevada Gaming Control Board had regulated gambling for more than 70 years and would continue enforcing state law to protect the integrity of gaming.
Nevada Governor Joe Lombardo similarly maintained that sports-event contracts offered by prediction markets constitute gambling and should comply with the state’s licensing and regulatory framework.
Nevada Attorney General Aaron Ford described the decision as a major victory, rejecting efforts to characterise sports wagers as something fundamentally different because they are presented as financial products.
“Sports betting does not become something else simply because a company calls it an ‘event contract’,” Ford said.
He maintained that Nevada would continue resisting attempts by companies to avoid the protections and costs imposed on licensed gaming operators.
Nevada has been among the most aggressive states in confronting online prediction markets and has obtained court orders involving operators including Kalshi, Polymarket and Coinbase.
Kalshi had also previously agreed to implement third-party geofencing measures aimed at preventing people physically located within Nevada from entering prohibited contracts after regulators accused it of violating an injunction.
The wider regulatory dispute also affects companies such as Crypto.com and Robinhood, as states increasingly question whether sports-linked prediction products fall within federal commodities regulation or remain subject to traditional state gambling laws.
For now, the Ninth Circuit’s ruling gives Nevada its strongest judicial backing yet: Kalshi’s sports-event contracts are likely sports bets rather than federally protected swaps, and the state may enforce its gaming laws against them while the litigation continues.
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