A federal appeals court has delivered a significant blow to Kalshi, a prominent platform for prediction markets, ruling that the state of Nevada has the authority to regulate its sports betting contracts. This decision adds to the legal complexities surrounding an industry already facing scrutiny across multiple jurisdictions.
On Friday, the U.S. Court of Appeals for the Ninth Circuit issued a unanimous decision stating that Kalshi had not demonstrated that federal law prevents Nevada from enforcing its gaming regulations on the company’s sports event contracts.
Understanding the Court’s Ruling
The court clarified that Kalshi’s contracts are likely considered sports bets under Nevada law, rather than “swaps” as defined by the federal Commodity Exchange Act (CEA). This distinction is crucial, as swaps fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC), which asserts exclusive oversight over prediction markets.
The court emphasized: “The CEA likely does not preempt Nevada’s gaming regulations as applied to Kalshi’s sports event contracts.”
This ruling follows Nevada’s issuance of a cease-and-desist letter in 2025, instructing Kalshi to halt its operations concerning election and sports event contracts within the state. Although a lower court initially granted Kalshi an injunction to continue its activities, this ruling was later overturned by the Ninth Circuit.
In light of these developments, Kalshi has already ceased operations in Nevada and other states facing similar regulatory challenges.
Conflicting Federal Court Decisions
The Ninth Circuit’s ruling presents a direct conflict with an earlier decision from April, in which another federal court concluded that New Jersey could not regulate Kalshi’s activities. This disagreement has created what is known as a circuit split.
The CFTC has publicly criticized the Ninth Circuit’s interpretation, with spokesperson Zach Fulton arguing that the ruling “invented a new and atextual exception” to federal commodities law. He further suggested that this case is now poised for resolution by the Supreme Court.
CFTC Chair Michael Selig reiterated the agency’s position, asserting its “exclusive jurisdiction” over prediction markets, including those related to sports. The CFTC has taken legal action against several states to uphold this stance.
Nevada Gaming Control Board Chairman Mike Dreitzer hailed the ruling, stating that it affirms the need for state regulation of sports betting. “This is sports betting and needs to be properly regulated by the state,” he asserted.
Kalshi, however, intends to contest the decision. Spokesperson Dani Lever expressed confidence that federal regulations do not prohibit sports contracts and noted that the CFTC is working to clarify its regulatory framework. Kalshi plans to seek further judicial review.
The American Gaming Association, representing traditional sportsbooks, welcomed the ruling, describing it as a substantial setback for Kalshi and similar entities that circumvent state laws.
As Connecticut recently filed a new lawsuit against Kalshi, the list of active legal challenges continues to grow. With conflicting judicial interpretations emerging, the possibility of Supreme Court intervention seems increasingly likely.
