A federal appeals court has ruled against Kalshi, finding that the prediction market operator’s sports event contracts look much more like bets than financial swaps — and clearing Nevada to enforce its gaming laws against the platform.
By Maria Rodriguez | August 29, 2026
The U.S. Court of Appeals for the Ninth Circuit ruled on Aug. 28 that Kalshi had not shown that the Commodity Exchange Act likely overrides Nevada’s gaming rules for sports event contracts. The unanimous three-judge panel rejected all three of Kalshi’s preemption arguments, allowing the Nevada Gaming Control Board to act while litigation continues.
“The CFTC Is Not a National Gambling Regulator”
The heart of the dispute is whether Kalshi’s sports contracts are regulated financial products or plain gambling. Kalshi operates a designated contract market regulated by the Commodity Futures Trading Commission, and nobody disputed that its sports contracts trade on that venue. Federal law gives the CFTC exclusive authority over swaps traded on such markets.
But writing for the panel, Circuit Judge Ryan Nelson found the products likely do not qualify as swaps at all — because they function as sports bets. The panel drew a fine but decisive line: a market on whether the Super Bowl takes place concerns the occurrence of an event, while a contract asking which team wins concerns its outcome. Kalshi’s contracts, the court said, carry the “hallmarks of sports betting,” a traditional form of gambling. The opinion also pointed to Kalshi’s own marketing of its service as an app for legal sports betting across all 50 states.
“The CFTC is not a national gambling regulator,” Nelson wrote. “No one suggested it was until over a decade after the law was passed.” Accepting Kalshi’s interpretation, the court reasoned, would place nearly all sports wagering under CFTC control — and would raise concerns under the major questions doctrine, since Congress never clearly assigned nationwide gambling regulation to the agency through the Dodd-Frank Act.
How We Got Here
Nevada’s regulator sent Kalshi a cease-and-desist letter after concluding the company was running a sports betting platform without the licenses state law requires. Kalshi went to federal court arguing CFTC oversight displaced Nevada’s authority, and initially won: in April 2025 a district court granted a preliminary injunction blocking the state. Later decisions involving similar products reached different results, and Nevada asked the judge to reconsider.
U.S. District Judge Andrew Gordon dissolved the injunction in November 2025 after denying a related request from Crypto.com, finding that sports contracts tied to a game’s result did not meet the legal definition of a swap. The Ninth Circuit has now affirmed that outcome, also rejecting Kalshi’s claims that complying with both federal and Nevada law was impossible or that federal law occupied the entire regulatory field.
A Court Split With Real Consequences
The ruling creates an open conflict: it directly contradicts an April decision involving New Jersey and Kalshi, where a different court saw the preemption question the other way. That split makes the issue a strong candidate for Supreme Court review, and until it is resolved, prediction market operators face a patchwork of rules that change at every state line.
The decision also cuts off one of Kalshi’s key defenses: self-certification. The court found that listing the sports contracts on its CFTC-regulated venue did not establish protection from state law. Under the Commodity Exchange Act’s special rule for event contracts, the CFTC may review and prohibit contracts involving gaming when it finds them contrary to the public interest. Meanwhile, Nevada’s separate challenge to Kalshi’s election contracts will return to the district court.
What This Means for You
If you trade on prediction markets, the practical impact is immediate in Nevada: the state can now enforce its gaming laws against Kalshi’s sports contracts while the case continues. More broadly, the ruling signals that courts may be unwilling to let federal technicality trump what they see as obvious gambling activity, no matter how the contracts are packaged.
For the crypto and event-contract industry, the stakes are enormous. Platforms like Kalshi and Crypto.com have built sports and election markets into major growth businesses on the theory that CFTC registration puts them beyond state gambling law. The Ninth Circuit just said that theory likely fails for sports contracts, and election contracts face their own pending challenge. Expect more states to send cease-and-desist letters, and expect the losing side to push hard for the Supreme Court to settle the question.
The cryptocurrency market remains highly volatile. This article is for informational purposes only and does not constitute financial advice.
Disclaimer: This article is for informational purposes only and does not constitute financial advice.
unanimous three judge panel, all three preemption arguments rejected. kalshi got smoked here
3 for 3 on preemption arguments rejected, brutal. And Nevada can enforce while the case keeps dragging, thats the part that stings for them
nevada enforcing while litigation drags is the real punishment. kalshi can win eventually and still bleed dry paying lawyers for two years
ninth circuit basically said come on man, you know these are sports bets. the financial swap cosplay was never gonna hold lol
All three preemption arguments rejected unanimously. That is a brutal appeals court loss, expect a cert petition next.
supreme court is a long shot but they have nothing to lose now. nevada was never gonna let a sportsbook with extra steps slide
cert is a long shot but the major questions language in this opinion basically drafts the petition for their lawyers
cert after a unanimous panel with zero dissents is basically petitioning for a mercy rule. their own lawyers know the odds
zero dissents plus the nelson quote is basically the court daring them to file cert. marketing materials got quoted in a ninth circuit opinion, thats a loss with interest
the CEA preemption angle was their whole case and a unanimous panel didnt buy one word of it. swap cosplay officially dead
the CFTC is not a national gambling regulator, that line is going to be quoted for years. Nelson understood the assignment
^ disagree, this pushes sports markets offshore where nobody checks anything. nevada wins, retail loses
The offshore point is the one nobody wants to hear. Kill the regulated version and the same bettors end up on a CSGO skin site by Friday.
The skin site line lands hard. Nevada protects its license revenue, and the players it claims to protect get one regulated door closed and ten offshore ones open.
ten offshore doors open is the part regulators refuse to model. nevada protects its cut and calls it consumer protection
The CSGO skin comparison is dead on. Regulated markets pay for KYC and betting limits, offshore books pay streamers. Guess where the flow ends up
true, but kalshi marketing itself as legal sports betting in all 50 states handed nevada the receipts. that quote is in the opinion
calling it a swap when it functions exactly like a sportsbook bet was never going to survive the Ninth Circuit. smart ruling
kalshi can keep litigating but the ninth circuit letting the Nevada Gaming Control Board act mid-lawsuit is the real damage. every state regulator just got a roadmap
the nelson line about cftc not being a national gambling regulator is going in every gaming law textbook now. unanimous panel, three preemption arguments, gone
the nelson line plus nevada enforcing mid case is a double hit. best case now is kalshi winning slow and going broke on legal fees
everyone acting like this kills sports categories overnight. polymarket already delisted them for us users months ago, the offshore drain started before this ruling
nevada enforcing while the case continues is the detail people skip. kalshi can win the war and still lose every sports market state by state in the meantime
the event vs outcome distinction is doing all the work here. super bowl happens vs who wins feels thin, but it held unanimously