A U.S. appeals court ruling has intensified the legal battle over prediction-market event contracts, creating a conflict with another federal court decision and raising the prospect of a Supreme Court review.
Kalshi suffered a major setback after the Ninth Circuit rejected its argument that Nevada could not regulate its sports-related event contracts. The decision adds to the growing uncertainty surrounding how state gambling laws interact with federally regulated prediction markets.
A unanimous three-judge panel of the U.S. Court of Appeals for the Ninth Circuit ruled Friday that the Commodity Exchange Act likely does not override Nevada’s gambling regulations as they apply to Kalshi’s sports contracts.
The judges disagreed with Kalshi’s claim that its contracts should be classified as swaps falling under the exclusive authority of the Commodity Futures Trading Commission. Instead, the panel determined that the products in question were essentially sports bets and therefore could remain subject to state gaming rules.
Federal Courts Now Disagree
The latest ruling has not settled the dispute. Rather, it has created a direct conflict with an earlier federal court decision.
In April, a separate federal court ruled that New Jersey did not have the authority to regulate Kalshi’s activities. The opposing decisions have created a growing circuit-level dispute over whether states can regulate event contracts offered by federally supervised exchanges.
That legal split could eventually push the issue toward the U.S. Supreme Court.
CFTC spokesperson Zach Fulton said the Ninth Circuit had incorrectly interpreted federal commodities law. He argued that contracts structured as swaps should be treated as swaps regardless of the underlying subject, with federal law providing only narrow exceptions.
According to Fulton, the Ninth Circuit effectively created an exception that does not appear in the text of the Commodity Exchange Act.
Nevada Maintains Its Sports-Betting Position
Nevada regulators have been challenging prediction market operators since 2025, arguing that sports-related contracts amount to wagering and therefore require approval under the state’s gambling laws.
Kalshi has already stopped operating in Nevada and several other jurisdictions following state enforcement actions. Even so, Nevada officials welcomed the latest court decision.
Mike Dreitzer, chairman of the Nevada Gaming Control Board, said the ruling reinforced the state’s position that Kalshi’s sports contracts constitute sports betting and should be regulated accordingly.
The decision also discussed similar sports-related offerings from Robinhood and Crypto.com, potentially giving the ruling implications beyond Kalshi.
Kalshi Signals Further Appeal
Kalshi focused on what it views as a favorable element of the decision.
Company spokesperson Dani Lever said the Ninth Circuit agreed with the Third Circuit that federal law prevents states from regulating trading on federally licensed exchanges such as Kalshi.
However, Kalshi continues to dispute the court’s conclusion that its sports contracts fall under state gambling authority. The company argues that CFTC regulations do not currently prohibit sports event contracts and said the agency is considering regulatory clarification.
Lever indicated that Kalshi will seek further review of the decision.
Broader Prediction-Market Fight Continues
The dispute is part of a wider legal confrontation between prediction market companies and state regulators across the U.S.
Kalshi and competing platforms have faced lawsuits and regulatory challenges in multiple states, with cases proceeding through both state and federal courts. Connecticut added another case to the growing list earlier this week.
The CFTC has also become an active participant in the broader dispute. The agency has brought several lawsuits of its own, arguing that federal law gives it primary or exclusive authority over Kalshi and similar prediction market businesses.
Traditional sports betting operators welcomed the Ninth Circuit ruling. The American Gaming Association described the decision as a win for consumer protections and public revenues, while accusing Kalshi and similar platforms of effectively offering sports gambling while bypassing state regulatory systems.
With federal courts now taking different positions, the legal framework governing prediction markets remains unresolved, increasing the likelihood of further appeals and potentially a final ruling from the Supreme Court.
