The Ninth Circuit Court of Appeals ruled on August 28, 2026, that Kalshi’s sports event contracts constitute gambling rather than CFTC-regulated swaps. The decision hands Nevada a victory in its regulatory crackdown, rejecting prediction markets’ requests for injunctive relief and deepening an ongoing circuit split.
Ninth Circuit Rejects Prediction Markets in Nevada Regulatory Clash
State regulators and prediction market operators have collided head-on following a decisive federal ruling. The Ninth Circuit Court of Appeals delivered a major blow to prediction platforms by rejecting requests for injunctive relief brought by Kalshi, Crypto.com, and Robinhood against the Nevada Gaming Control Board.
The panel concluded that sports-related event contracts offered on these platforms are not federal swaps under the Commodity Exchange Act, but rather sports bets subject to state gaming rules. This outcome deepens a widening legal chasm across federal circuits, following a contrasting April ruling from the Third Circuit in favor of New Jersey.
Statutory Definitions and the Shakespearean Rebuttal
At the center of the dispute lies the statutory definition of a swap under the Commodity Exchange Act, which grants the Commodity Futures Trading Commission exclusive jurisdiction over agreements dependent on an event associated with a potential financial, economic, or commercial consequence. Kalshi argued that its sports contracts fit this definition, thereby preempting state-level gambling restrictions.
The court disagreed sharply with that interpretation. Writing for the majority, Judge Nelson emphasized that labeling a financial instrument a swap does not change its underlying substance.
In the same opinion, Judge Nelson added that placing sports bets, even when called by another name, is still gambling. The panel noted that while the broadest possible reading of the swap definition might encompass sports event contracts, that interpretation conflicts with the broader statutory scheme and lacks any limiting principle. The court reasoned that Congress has spoken on the issue of gambling in other statutes and did not repeal those laws when passing the Dodd-Frank Act.
Concurring Opinion Questions the Economic Impact of a Single Game
Judge Kenneth Lee joined the majority opinion and authored a concurrence unpacking the linguistic and economic limits of the word event
in federal law. Judge Lee argued that the natural reading of a swap definition excludes the outcome of an athletic contest.
Expanding on that point, Judge Lee noted that the outcome of a typical sports game is rarely associated with the kind of financial consequence expected in a legitimate swap contract. He observed that while a loss might theoretically prompt some fans to purchase more beverages, describing a single game within a 162-game season as having direct swap-level economic consequences seems somewhat fanciful
.
High Financial Stakes and Revenue Realities for Kalshi
The judicial setback arrives at a crucial financial juncture for Kalshi. Sports event contracts generate 90% of Kalshi’s revenue, placing the company’s core business model directly in the crosshairs of state regulators. Despite the mounting regulatory pressure and state-level legal challenges—including a recent lawsuit filed by Connecticut to block similar contracts—the platform is reportedly seeking a new funding round at a $40 billion valuation.
Meanwhile, the regulatory friction extends beyond Nevada. Arizona stands as one of nine states previously sued by the CFTC in an effort to defend exclusive federal jurisdiction over prediction markets. The Ninth Circuit’s ruling provides an immediate legal victory to state gaming authorities across Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington.
Supreme Court Horizon and Future Legal Scrutiny
Legal experts suggest the battle is far from over. Attorney Daniel Wallach noted that Kalshi faces a choice between seeking a rehearing en banc or escalating the dispute directly to the Supreme Court. Wallach expects the platform to bypass an en banc review, observing that the appeal was lost before a panel consisting of three Trump-appointed judges.
Wallach also highlighted a secondary implication of the ruling: election event contracts could soon face similar scrutiny. The Ninth Circuit remanded the case back to the district court to evaluate Nevada’s specific challenges against Kalshi’s election-related contracts in light of this new opinion. As Wallach observed on social media, no state targeted election contracts until platforms pushed aggressive boundaries into sports betting.
