coindesk.com
The legal pressure is ratcheting up on Kalshi and the broader U.S. prediction market industry after a significant federal court rejection of the company's argument that the state of Nevada had no right to regulate its betting activity.
The panel of judges from the U.S. Court of Appeals for the Ninth Circuit issued a unanimous decision on Friday, disagreeing with Kalshi's argument that Nevada regulators don't have a role in overseeing its business, which is conducted on a platform regulated by the Commodity Futures Trading Commission and the law that underpins it, the Commodity Exchange Act.
"The panel concluded that the CEA likely does not preempt Nevada’s gaming regulations as applied to Kalshi’s sports event contracts," according to the ruling, which disputed that the activity qualifies as "swaps" trades that belong under the CFTC's jurisdiction. Under U.S. commodities law, "the sports event contracts were not 'swaps' because they were sports bets."
But instead of slamming the door on the increasingly popular form of retail trading, the ruling further muddies the waters; in April, another federal court had made an opposite determination when telling New Jersey it had no business regulating Kalshi. With opposing court actions, it's even more likely the U.S. Supreme Court will have to take up the U.S. industry's core question.
"The Ninth Circuit has now teed up a circuit split that calls out for resolution by the Supreme Court," said CFTC spokesman Zach Fulton in an email, accusing the judges of misreading the law. "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."
State authorities in Nevada had opposed the prediction markets businesses since 2025 and reiterated on Friday that Kalshi has been engaged in illegal wagering under Nevada's gambling laws, though Kalshi had already pulled out of Nevada and other jurisdictions in response to local orders.
"This completely vindicates what we have been saying all along," Nevada Gaming Control Board Chairman Mike Dreitzer said in a statement responding to the ruling, which also referenced the betting at Robinhood and Crypto.com. "This is sports betting and needs to be properly regulated by the state."