A federal appeals court ruled against Kalshi on August 28, 2026, rejecting the prediction market platform’s attempt to block Nevada from enforcing state gaming law against its sports event contracts, a decision that deepens a growing legal split among federal courts over who has authority to regulate this industry.
What the Court Decided
A three-judge panel of the US Court of Appeals for the Ninth Circuit unanimously upheld the dissolution of a preliminary injunction that had previously prevented Nevada regulators from enforcing gaming rules against Kalshi.
That injunction had been in place while the underlying legal dispute worked through the courts, so its dissolution restores Nevada’s ability to apply its own gaming requirements to Kalshi’s sports contracts going forward.
The central legal question was whether the Commodity Exchange Act, the federal law underpinning Kalshi’s regulated exchange, preempts Nevada’s gaming regulations as applied to its sports contracts specifically.
The panel concluded it likely does not, finding that Kalshi’s sports event contracts do not qualify as “swaps,” the category of derivative that would fall under the Commodity Futures Trading Commission’s (CFTC) exclusive jurisdiction, because the court viewed them instead as sports bets.
Judge Ryan Nelson wrote that the contracts closely resemble traditional gambling, and questioned whether Congress intended broader financial reform legislation to override existing state gambling laws.
The ruling separately sent questions over Kalshi’s election contracts back to the district court for further review.
Why This Creates a Bigger Problem Than One State Ruling
The Ninth Circuit’s decision directly conflicts with a ruling the Third Circuit issued in April 2026 in a separate dispute between Kalshi and New Jersey.
That court reached the opposite conclusion, finding that Kalshi’s sports-related event contracts were indeed swaps under the Commodity Exchange Act and that federal law preempted New Jersey’s gambling restrictions.
With two federal appeals courts now reaching contradictory conclusions on substantially similar contracts, the same type of product is subject to different legal treatment depending purely on which jurisdiction a case lands in.
CFTC spokesman Zach Fulton characterized the situation directly, saying, “the Ninth Circuit has now teed up a circuit split that calls out for resolution by the Supreme Court.”
“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.”
How Each Side Is Characterizing the Outcome
Nevada Gaming Control Board Chairman Mike Dreitzer framed the ruling as full validation of the state’s position. “This completely vindicates what we have been saying all along,” Dreitzer said. “This is sports betting and needs to be properly regulated by the state.”
The American Gaming Association, representing traditional sports betting operators who compete directly with Kalshi, went further in its own statement, calling the ruling “a significant win for consumer protections and taxpayers” and describing Kalshi and similar platforms as “backdoor sports gambling operations who defy state laws.”
Kalshi, for its part, emphasized a narrower point it believes favors its broader legal position. Spokesperson Dani Lever noted that “the Ninth Circuit agreed with the Third Circuit on a fundamental point: Federal law prevents states from regulating trading on a federally licensed exchange, like Kalshi,” even though the court ultimately ruled against Kalshi on this specific application because it found these particular contracts were not swaps in the first place.
Lever added that Kalshi still believes CFTC regulations as written do not prohibit sports contracts, that the CFTC is working to clarify those regulations, and that Kalshi will be seeking further review of the decision.
This Fits a Wider, Ongoing Pattern
Kalshi had already withdrawn its sports prediction market business from Nevada and several other jurisdictions in response to earlier local orders, meaning this ruling formalizes an outcome Kalshi was already operating under rather than introducing a brand-new restriction.
Nevada, Massachusetts, Michigan, and Washington have each secured court orders against Kalshi’s platform, and Arizona has separately pursued criminal charges over alleged illegal gambling.
Connecticut recently filed its own lawsuit against Kalshi, though that case centers on specific allegations about marketing practices aimed at under-21 users rather than the core jurisdictional question at issue in the Nevada and New Jersey cases. Our earlier coverage of the CFTC’s recent guidance to prediction market platforms covers a related piece of this same regulatory landscape.
The CFTC has responded by pursuing its own lawsuits arguing it should hold sole jurisdiction over Kalshi and similar companies, and is separately developing new rules for event contracts, including a proposed framework for determining when contracts involving gaming and other specified activities may be prohibited outright.
Any final rule to emerge from that process could reshape the legal arguments currently being tested in court, though it would not automatically resolve the underlying dispute over how much authority individual states retain.
That rulemaking process has not been finalized, meaning courts are currently deciding these jurisdictional questions case by case without the benefit of a settled federal framework specifically addressing sports and gaming-related event contracts.
What Comes Next
Kalshi has said it will seek further review of the Ninth Circuit’s decision, and the growing conflict between federal appellate courts increases the likelihood that the US Supreme Court will eventually take up the underlying jurisdictional question, though no timeline exists.
In the meantime, operating a nationwide prediction market business becomes more complicated if individual states can independently block specific products, demand gaming licenses, or pursue enforcement actions, particularly while a separate federal appeals court has already ruled the opposite way on materially similar contracts.
Other prediction market operators offering similar sports-related contracts face the same uncertainty, since this circuit split applies to the underlying legal question rather than to Kalshi specifically.
What this means for you: this ruling does not resolve whether sports-related prediction contracts will ultimately survive under federal oversight nationwide, and the practical effect for now is a patchwork where the same kind of contract faces different legal treatment depending on which state and which federal circuit a dispute happens to land in.
