The Ninth Circuit has dealt Kalshi one of its biggest legal losses yet, ruling that the platform’s sports-event contracts are sports bets—not swaps protected by the Commodity Exchange Act. The decision lets Nevada enforce its gaming laws against Kalshi’s sports products, deepens a circuit split with the Third Circuit, and raises the stakes for prediction-market operators facing state regulators around the country.
The United States Court of Appeals for the Ninth Circuit delivered a major win to Nevada Friday, and a major setback to Kalshi’s central legal argument for offering sports contracts nationwide.
In a published opinion, a unanimous three-judge panel affirmed the dissolution of Kalshi’s preliminary injunction against Nevada gaming regulators. The court held that Kalshi had not shown it was likely to prove that the Commodity Exchange Act preempts Nevada’s gambling laws as applied to its sports-event contracts.
The key conclusion was blunt: Kalshi’s sports products are sports bets, not Commodity Futures Trading Commission-regulated swaps.
That does not end Kalshi’s case altogether. The court remanded the dispute over Kalshi’s election contracts to the Nevada district court for separate consideration. But for the platform’s sports business, the part that made up more than 90% of Kalshi trades and 95% of its revenue in 2025, according to the opinion, the ruling is a serious legal problem.
The Nevada fight
The dispute began in March 2025, when the Nevada Gaming Control Board sent Kalshi a cease-and-desist letter. Nevada argued that the company’s sports-event contracts constituted an unlicensed sports pool under state gaming law.
Kalshi argued that it is not a sportsbook but a CFTC-registered designated contract market (DCM) listing federally regulated event contracts. It stated the CFTC’s authority over swaps preempted Nevada’s gaming rules. A district judge initially gave Kalshi a preliminary injunction, but later dissolved it after a separate Nevada ruling against Crypto.com reached the opposite conclusion on similar sports contracts.
Friday’s appeals decision backs Nevada’s position. The court held that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over qualifying swaps traded on a DCM, but that Kalshi’s contracts on sports outcomes do not qualify as swaps in the first place.
The panel said a bet on whether a team covers a spread, wins a game, or hits a particular score is not materially different from the same wager at a conventional sportsbook. Kalshi’s market structure may differ from Caesars or MGM, the court said, but those differences do not change the legal substance of the product.
Why the court rejected Kalshi
Kalshi’s argument centered on the broad statutory definition of a swap: a contract tied to the occurrence or nonoccurrence of an event or contingency that carries a potential financial, economic or commercial consequence.
The Ninth Circuit agreed that the CEA can preempt some state regulation of swaps traded on federally designated markets. But it rejected Kalshi’s view that every event contract listed on a DCM automatically receives that federal shield.
The court’s reasoning had three major pieces:
- Sports outcomes are bets, not swaps. The panel distinguished between an event occurring and its result, such as a team winning the Super Bowl or covering a point spread. It said Kalshi’s contracts turn on results, not the kind of event occurrence contemplated by the swap definition.
- A broad reading would swallow sports betting. The judges said Kalshi’s interpretation had no workable limiting principle. If betting on the outcome of a game is a swap, the court reasoned, the same logic could extend to ordinary sportsbook wagers, bingo, or even table-tennis bets, bringing them within CFTC jurisdiction.
- Existing CFTC rules cut against Kalshi. The court focused heavily on CFTC Rule 40.11, which says a registered entity “shall not” list contracts involving, relating to, or referencing gaming.
The judges also rejected Kalshi’s claims of conflict and field preemption. They said Kalshi could comply with Nevada law by geofencing users in Nevada, as other regulated entities do. They held that Congress had not clearly given the CFTC authority to displace states’ longstanding role in regulating gambling.
A split with the Third Circuit
The ruling creates a direct and increasingly consequential split with the Third Circuit.
Earlier this year, the Third Circuit affirmed an injunction protecting Kalshi from New Jersey gambling enforcement, concluding that Kalshi’s sports-related event contracts could be treated as swaps under the CEA and that federal law preempted the state’s attempt to regulate them.
The Ninth Circuit explicitly disagreed with that approach. It said the Third Circuit read the term “event” too literally and failed to account for the statutory context, the CFTC’s prohibition on gaming, and the fact that Congress has historically treated sports gambling as an area for state and tribal regulation.
That leaves two federal appellate courts interpreting the same federal law differently. Kalshi may seek rehearing or Supreme Court review, particularly because the CFTC appeared as an amicus supporting the company’s position. But for now, the Ninth Circuit’s decision is controlling across a large portion of the West.
A win for states and gaming groups
The American Gaming Association hailed the decision as a victory for state authority and the established gaming framework.
“The Ninth Circuit’s unanimous decision confirmed state and voter choices about sports betting in their communities,” the AGA said in a statement. “The American Gaming Association applauds Nevada’s leadership for protecting and preserving the state- and tribal-regulated gaming framework. This ruling is a significant win for consumer protections and taxpayers.
“It is a big loss for Kalshi and other backdoor sports gambling operations who defy state laws.”
What it means nationally
The Nevada ruling is a major setback for prediction markets, but it does not settle the nationwide fight.
Kalshi has picked up preliminary-injunction wins in New Jersey, Tennessee and Arizona, while courts in Maryland, Ohio, New York and now Nevada have rejected or limited its preemption argument. The Fourth Circuit appeal from the Maryland decision is still pending, and the Ninth Circuit’s ruling notes that litigation remains active in multiple jurisdictions.
The immediate practical distinction is between sports contracts and other types of event contracts. The Ninth Circuit sent the question of Kalshi’s election markets back to the Nevada district court rather than deciding it, leaving political prediction markets outside the court’s core holding for now.
