Ninth Circuit’s Kalshi Ruling Sets Up a Supreme Court Collision Course
Prediction markets like Kalshi have spent two years arguing they are federally regulated derivatives platforms, immune to state gambling law because the Commodity Futures Trading Commission, not state gaming boards, has jurisdiction over their contracts. On August 28, a second federal appeals court disagreed, and it disagreed with enough force to put the question on a likely path to the Supreme Court.
April 2026: The Third Circuit sides with Kalshi
Earlier this year, the Third Circuit Court of Appeals ruled that event contracts, including the sports-outcome contracts at the center of this fight, qualify as swaps under the Commodity Exchange Act and therefore fall under exclusive federal jurisdiction. That ruling gave Kalshi and similar platforms grounds to argue that state gaming regulators in places like Nevada, New Jersey, and elsewhere had no authority to shut them down or force them to obtain state gambling licenses.
August 28, 2026: The Ninth Circuit breaks the other way
A three-judge panel of the Ninth Circuit Court of Appeals unanimously rejected that reasoning in a dispute over Nevada’s authority to regulate Kalshi’s sports-related event contracts. In a 50-page opinion, the panel found that sports event contracts function as sports bets rather than federally regulated swaps, and that the Commodity Exchange Act likely does not preempt Nevada’s gaming laws. The court denied Kalshi’s request for an injunction that would have blocked the Nevada Gaming Control Board from enforcing its cease-and-desist order against the platform.
What a circuit split actually means
Two federal appeals courts have now reached opposite conclusions on the same legal question: whether the CFTC’s jurisdiction over derivatives preempts state authority to regulate sports-related prediction contracts as gambling. That kind of direct conflict between circuits is one of the clearest signals the Supreme Court uses to decide whether a case is worth taking up, since it leaves the same type of contract legal in some parts of the country and illegal in others depending solely on which federal circuit a state sits in. Legal commentators tracking the case flagged the Ninth Circuit ruling as deepening a divide that increases the odds of eventual Supreme Court review, though no petition for certiorari has been filed as of publication.
Where this leaves Kalshi’s Nevada business, and what comes next
Kalshi issued a statement condemning the Ninth Circuit’s decision and said it intends to continue appealing. In the meantime, the ruling clears the way for Nevada to enforce its gaming laws against Kalshi’s sports contracts within the state, joining a broader pattern of state-level pushback the platform has faced. The CFTC itself has separately sued several states, including Arizona, Illinois, and Connecticut, arguing that state regulators are overstepping into territory that belongs to federal oversight, meaning this fight is now playing out simultaneously in multiple courts across the country rather than resolving in any single case.
This article is for informational purposes only and does not constitute financial, legal, or investment advice. Prediction markets and their underlying legal status vary by jurisdiction and remain subject to ongoing litigation. Always do your own research before making investment or trading decisions.
For a broader look at how U.S. regulators are drawing lines around crypto and adjacent markets, browse more coverage at the Coin680 Bitcoin Academy.