A federal appeals court ruled on Aug. 28 that Kalshi failed to demonstrate that Nevada’s regulation of its sports-event contracts is likely preempted by federal commodities law, allowing state gaming authorities to continue enforcement actions while the case proceeds.
The unanimous Ninth Circuit decision concluded that Kalshi had not established a strong likelihood of success in its argument that its sports-event contracts fall exclusively under federal oversight through the Commodity Exchange Act. As a result, Nevada retains the authority to apply its gaming laws to the contracts during the ongoing litigation.
Kalshi, which operates as a Commodity Futures Trading Commission (CFTC)-regulated designated contract market, argued that its sports-event contracts qualify as swaps and therefore fall under federal jurisdiction. The court rejected that position at this stage of the case, finding that the contracts more closely resemble sports wagers than traditional financial swaps.
Writing for the panel, Circuit Judge Ryan Nelson stated that the CFTC “is not a national gambling regulator,” emphasizing that Kalshi’s interpretation would significantly expand federal authority beyond what Congress intended.
The ruling also touched on the major-questions doctrine, suggesting that a broad interpretation of the CFTC’s authority over sports-event contracts could raise constitutional and statutory concerns. However, the court did not invalidate the agency’s ongoing rulemaking efforts or determine whether future regulations would withstand challenges under the Administrative Procedure Act (APA).
The decision has intensified debate over the future of prediction markets and event contracts in the United States. Legal analyst Daniel Wallach argued that the court’s reasoning creates substantial obstacles for the CFTC’s proposed framework governing event contracts tied to gaming activities. Others, including Ripple CTO Emeritus David Schwartz, disagreed, arguing that Congress could establish a federal framework for such contracts without displacing state-regulated sports betting systems.
The dispute comes as the CFTC continues reviewing a proposed rule that would create a formal process for evaluating event contracts involving gaming, terrorism, war, assassination, and other sensitive subjects. The proposal remains under consideration following the close of the public comment period in July.
The Ninth Circuit’s ruling also deepens a growing legal divide between federal appellate courts. Its decision conflicts with an earlier Third Circuit ruling that favored Kalshi in a separate dispute with New Jersey. That split increases the possibility that the issue could eventually be reviewed by the U.S. Supreme Court.
For now, Nevada may continue enforcing its gaming regulations against Kalshi’s sports-event contracts, while broader questions surrounding federal authority, state gambling laws, and the future regulation of prediction markets remain unresolved.
