Ninth Circuit Sides With Nevada, Says Kalshi's Sports Contracts Are Just Sports Bets

States just scored their biggest win yet against prediction markets. The Ninth Circuit Court of Appeals ruled unanimously Friday that Nevada's gaming regulators can enforce state gambling law against Kalshi's sports-related event contracts, according to CNN and the Nevada Independent.

The 3-0 panel, made up of three Trump-appointed judges according to CNN, dissolved a preliminary injunction that had been shielding Kalshi from Nevada's Gaming Control Board. That injunction had let Kalshi keep operating in the state while the case played out.

What the Court Actually Said

Kalshi's whole argument boiled down to this: it's registered with the Commodity Futures Trading Commission as a "designated contract market," and under the Commodity Exchange Act, the CFTC has exclusive jurisdiction over swaps and derivatives. Federal registration, Kalshi argued, should trump state gambling law.

The court wasn't buying it. "The substance of the sports event contracts offered on Kalshi's [exchange] is sports gambling, regardless of whether Kalshi calls them swaps," the panel wrote, according to CNN. Judge Ryan Nelson, writing for the court, said the panel disagreed with "Kalshi's overly broad reading" of the Commodity Exchange Act, per the Nevada Independent.

The court also noted that current CFTC regulations already prohibit offering gaming-related contracts on prediction markets, which undercut Kalshi's own federal-preemption theory, according to the Nevada Independent.

Crypto.com and Robinhood lost their own bids for injunctive relief in the same ruling, according to CNBC. Both platforms offer similar sports-related event contracts.

A Split Outcome for Kalshi

Not every part of Kalshi's business took the hit. The Ninth Circuit sent questions about election-related contracts back down to the district court for further review, according to Crypto Briefing and KuCoin. Sports contracts are the ones now clearly exposed to state enforcement across the Ninth Circuit's territory, which covers California, Arizona, Nevada and six other states, according to CNN.

Kalshi has a few paths left: ask the full Ninth Circuit to rehear the case en banc, go straight to the Supreme Court, or fight the election-contract question at the district court level, according to Crypto Briefing. A unanimous 3-0 ruling gives Kalshi no dissenting opinion to lean on for a rehearing bid, which independent prediction-market journalist Dustin Gouker called a particularly hard result for the company, telling CNN it was "pretty brutal" and "the first ruling against Kalshi at the appellate level."

The CFTC Pushes Back

The CFTC didn't sit quietly. A spokesperson told CNBC the commission believes the court got it wrong: "A derivative contract structured as a swap is a swap regardless of the underlying subject matter, the only exceptions in statute are onions and movie box office receipts. The Ninth Circuit erred today when it invented a new and atextual exception to the CEA."

Congress wrote the Commodity Exchange Act to give the CFTC one clear national rulebook for derivatives, precisely so a swap doesn't face 50 different state interpretations. The agency has sued nine states over this exact jurisdictional fight, according to CNBC, because a patchwork of state gambling regimes is the opposite of what a unified federal derivatives market is supposed to look like.

Now It's a Circuit Split

This ruling directly contradicts an April decision from the Third Circuit Court of Appeals, which sided with prediction markets and blocked New Jersey from applying its gaming law against the same kind of contracts, according to CNN and CNBC. New Jersey's lawyers have said they intend to take that case to the Supreme Court.

Columbia Law School professor Joshua Mitts told CNBC this is now "a classic circuit split," the kind of disagreement between federal appeals courts that all but forces the Supreme Court's hand. "Ultimately, this is the kind of legal controversy or legal difference of opinion which will make its way to the Supreme Court," Mitts said.

Arizona Attorney General Kris Mayes, whose state has its own pending litigation against Kalshi, cheered the ruling. "Calling a sports bet a 'swap' doesn't make it one," Mayes said in a statement, adding that Kalshi's position "would have effectively federalized sports betting regulation nationwide and swept aside decades of state and Tribal oversight built to protect consumers." Mayes said her office is reviewing the opinion's implications for Arizona's own case.

Robinhood said it plans to appeal, telling CNBC "every eligible customer should have access" to its markets. Markets reacted fast: shares of DraftKings jumped 7% and Flutter Entertainment, FanDuel's parent, rose more than 6%, according to a report citing CNBC data, as traditional sportsbooks that had been losing ground to prediction markets got a reprieve.

The immediate practical effect is that the Ninth Circuit's ruling is now binding precedent across California, Arizona, Nevada and the rest of the circuit, meaning other states there can move to enforce against Kalshi's sports contracts too, according to CNN. Whether that holds nationally now rests on which circuit split the Supreme Court decides to resolve, and when it agrees to take the case.