The 9th US Circuit Court of Appeals ruled on 28 August that Nevada can regulate Kalshi’s sports event contracts under state gaming law, rejecting the exchange’s argument that federal commodities regulation strips states of that power.
The three-judge panel decided 3-0 that Kalshi failed to show a likelihood that the Commodity Exchange Act (CEA) preempts Nevada’s gaming statutes as applied to contracts tied to the outcome of sporting events. Judge Ryan Nelson wrote the opinion. Judge Kenneth K. Lee filed a concurrence.
The decision reverses the direction of travel for prediction markets in the US courts and creates a direct conflict with the 3rd Circuit, which sided with Kalshi in a New Jersey case in April.
The court looked past the labelling
The panel treated the question as one of substance rather than nomenclature. Kalshi lists its sports contracts as swaps traded on a designated contract market regulated by the Commodity Futures Trading Commission (CFTC). The court did not accept that framing.
“The substance of the sports event contracts offered on Kalshi’s exchange is sports gambling, regardless of whether Kalshi calls them swaps.”
The judges described parts of Kalshi’s case as disingenuous, pointing to the company’s own marketing, which used the language of sports betting. The opinion also states that the regulation of gambling has been and remains a matter for states and tribes, language that gives tribal operators a citation to use in their own disputes with prediction market platforms.
The panel remanded one separate question, the treatment of election contracts, to the district court for further consideration. That part of the dispute is unresolved.
Nevada moves to enforce
Nevada Gaming Control Board chairman Mike Dreitzer welcomed the ruling.
“We are pleased with the Ninth Circuit’s ruling today in favor of Nevada. This completely vindicates what we have been saying all along.”
Dreitzer added that the products are sports betting and need to be properly regulated by the state. Governor Joe Lombardo has taken the same line, saying prediction markets that offer sports contracts are conducting gambling and must comply with state requirements.
The board is not stopping at the declaratory point. Nevada regulators are pursuing contempt proceedings and daily penalties of $120,000 previously ordered against the exchange. Enforcement of that kind, if it survives the next round of appeals, changes the cost of operating an unlicensed sports contract market in the state from a legal risk into a running bill.
Kalshi will seek further review
Kalshi spokeswoman Dani Lever said the company’s position is unchanged: CFTC rules do not prohibit sports event contracts, and Kalshi will seek further review.
The procedural options are panel rehearing, rehearing en banc before a wider panel of the 9th Circuit, or a petition to the US Supreme Court. Kalshi has appealed adverse rulings before, including a New York decision it took to the Second Circuit in July after Judge Analisa Torres refused to block state enforcement.
The circuit split is the story for operators
Two federal appellate courts now hold opposite views on the same question. The 3rd Circuit’s April decision protects Kalshi in New Jersey. The 9th Circuit’s decision leaves Nevada free to regulate. A conflict between circuits on a federal preemption question is the standard route to Supreme Court review, and lawyers on both sides have said so publicly.
Until that resolves, the map for prediction markets in the US stays fragmented by jurisdiction. Platforms have spent 2026 defending in parallel: Kalshi has faced remand and appeal deadlines across several states while trading volume climbed, and Polymarket has been building out compliance functions, including trade surveillance ahead of the November midterms.
For licensed sportsbooks, the ruling is the first appellate finding that squarely puts sports event contracts inside state gambling law. Operators paying state licence fees, gaming taxes and responsible gambling obligations have argued for two years that exchange-listed sports contracts compete on the same product without the same costs. The 9th Circuit has now agreed with the characterisation, at least within its own territory.
What to watch next
Three things determine how far this ruling travels. Whether Kalshi seeks en banc review or moves straight to a cert petition. Whether the Nevada district court grants the contempt relief the board is seeking, and at what daily rate. And whether the CFTC, which has so far declined to bar sports event contracts, states a position of its own while the split is live.
A Supreme Court grant would put the question of who regulates sports event contracts, states or the federal commodities regime, in front of the one court that can settle it for every jurisdiction at once.
Source: US Court of Appeals for the Ninth Circuit
