Ninth Circuit rules Kalshi sports prediction contracts are gambling, not swaps, creating circuit split
The Ninth Circuit Court of Appeals ruled 3-0 on August 28, 2026, that Kalshi's sports-related event contracts are sports betting subject to state regulation, not swaps under federal commodity law. This contradicts an April 2026 Third Circuit ruling that all event contracts are swaps regulated by the CFTC. The circuit split makes Supreme Court review likely. The decision blocks platforms like Kalshi, Crypto.com, and Robinhood from offering sports contracts in Nevada and other Ninth Circuit states.
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9th Circuit Rules Kalshi's Sports Prediction Contracts Are Gambling, Not Swaps
The 9th Circuit Court of Appeals ruled on August 28, 2026, that the Commodity Exchange Act (CEA) does not preempt Nevada from enforcing its gambling laws against prediction market Kalshi's sports-related event contracts. The decision affirmed a lower court ruling, blocking platforms like Kalshi, Crypto.com, and Robinhood from offering sports event contracts in Nevada. The court rejected Kalshi's argument that its contracts qualify as swaps under the CEA, which would exempt them from state gambling laws. Unlike the 3rd Circuit, which granted Kalshi an injunction against New Jersey regulators, the 9th Circuit adopted a narrow textual reading of the CEA. The court found that Congress did not intend the Wall Street Reform Bill to upend gambling regulations, and noted that Kalshi's own marketing using the word 'bet' undermined its case. The ruling could also affect other 9th Circuit states like Arizona. A CFTC spokesman criticized the decision as misreading the statute. Judge Kenneth K. Lee wrote a concurring opinion offering some hope for prediction market supporters.
9th Circuit Rules Kalshi's Prediction Market Sports Contracts Are Gambling
The 9th Circuit Court of Appeals ruled that the Commodity Exchange Act (CEA) does not preempt Nevada from enforcing its gambling laws against prediction market Kalshi's sports-related event contracts. The decision, which affirmed an earlier district court ruling, prevents platforms like Kalshi, Crypto.com, and Robinhood from offering sports event contracts in Nevada and potentially other 9th Circuit states. The court rejected Kalshi's argument that its contracts qualify as swaps under the CEA, finding that a broad reading would not align with the statutory scheme and would raise major-questions doctrine concerns. The court noted Kalshi's own marketing, which uses the word 'bet' and suggests its platform is a loophole for sports betting, undermined its case. The ruling contrasts with a 3rd Circuit decision that granted Kalshi an injunction against New Jersey regulators. The CFTC criticized the ruling, while a concurring opinion offered some hope for prediction market supporters.
Kalshi Loses Nevada Court Fight as Prediction Markets Battle Over Who Gets to Regulate Them
The 9th U.S. Circuit Court of Appeals unanimously blocked Kalshi from avoiding Nevada gaming oversight, ruling that the Commodity Exchange Act does not override state licensing requirements for sports prediction contracts. The decision creates a circuit split with an April Third Circuit ruling that blocked New Jersey from regulating Kalshi, increasing the likelihood the Supreme Court will settle whether states or the CFTC govern prediction markets. Judge Ryan Nelson wrote that Kalshi's sports contracts resemble sports betting, not swaps under Dodd-Frank. Despite legal setbacks in Nevada, Massachusetts, Michigan, and Washington, Kalshi's business is growing, including a partnership with The Weather Company expecting $1.1 billion in weather-trading volume in 2026. Kalshi plans to seek further review.
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Three Trump-Appointed Judges Deliver Major Blow to Kalshi
The Ninth Circuit Court of Appeals ruled 3-0 against Kalshi, a prediction market platform, stating that federal commodity trading law does not prevent Nevada from regulating the platform's sports betting activities. All three judges were appointed by President Trump. Circuit Judge Ryan Nelson wrote that Kalshi's business constitutes sports betting, a form of gambling outside the CFTC's purview. The ruling conflicts with an earlier Third Circuit decision that sided with Kalshi against New Jersey, increasing the likelihood of Supreme Court review. The Trump administration had previously argued for federal preemption, but this decision allows state oversight. Over 20 states are litigating whether prediction markets fall under sports gambling laws, with 44 states signing a letter calling them a 'new form of casino.' Arizona criminally charged Kalshi in March for operating an illegal gambling business.
U.S. appeals court rules against prediction markets, setting up a likely fight at the Supreme Court
The Ninth Circuit Court of Appeals ruled on August 28, 2026, that sports-related event contracts offered by prediction market platforms like Kalshi, Crypto.com, and Robinhood are not 'swaps' under federal law, but rather sports betting subject to state regulation. This decision contradicts an April 2026 ruling by the Third Circuit, which held that all event contracts are swaps regulated exclusively by the Commodity Futures Trading Commission (CFTC). The circuit split makes it highly likely the U.S. Supreme Court will ultimately decide whether the CFTC or state gaming regulators have jurisdiction over prediction markets. The ruling was a blow to the platforms and the CFTC, which has sued nine states to assert its authority. Shares of traditional sportsbooks DraftKings and Flutter Entertainment rose on the news, as investors viewed the decision as reducing competitive pressure from prediction markets.