Another week means another Friday afternoon news dump, but this one is about as significant as they come — significant enough for me to write a standalone column.
In a 3-0 ruling, the Ninth Circuit ruled against Kalshi, affirming a lower-court ruling that dissolved Kalshi’s preliminary injunction and cleared Nevada to enforce its gaming laws against Kalshi’s sports event contracts.
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The Ninth Circuit ruled that Kalshi’s sports event contracts are not federally regulated swaps under the Commodity Exchange Act (CEA). They are sports bets.
The opinion, written by Judge Ryan D. Nelson and joined by Judge Bridget S. Bade, with a concurrence from Judge Kenneth K. Lee (all three are Trump appointees), didn’t pull punches.
Nelson wrote that it is disingenuous for Kalshi to deny that the contracts are sports bets under a reasonable person’s understanding, and that everyone, including Kalshi, knows a sports bet when they see it. The “including Kalshi” is interesting, but not surprising given the first sentence of the opinion reads: “KalshiEX, LLC advertises itself as ‘the first app for legal sports betting in all 50 states.’”
The decision also pointed to CFTC Regulation 40.11, which already prohibits listing contracts that involve or reference gaming — the CFTC is currently trying to amend these rules.
“Because we disagree with Kalshi’s overly broad reading of the CEA, and because CFTC regulations currently prohibit offering contracts related to gaming on prediction markets, we affirm the district court’s order dissolving the injunction as to sports event contracts. We remand for the district court to consider Kalshi’s election contracts.”
And We Have a Split
Before the Ninth Circuit decision, the Third Circuit was the only appellate court that had issued a ruling (a 2-1 split), and that ruling was in favor of Kalshi, with the Third Circuit finding that Kalshi’s sports event contracts are federally regulated “swaps” that preempt state gambling laws.
The Ninth Circuit ruling creates a circuit split with the Third Circuit, which makes Supreme Court review more likely, and potentially faster than it was before.
Of note, New Jersey has dragged its feet in filing a SCOTUS appeal. After the Third Circuit’s April decision, the state obtained extensions from Justice Samuel Alito, and explicitly flagged that it was watching other circuits, likely waiting for precisely this moment.
This is the moment it appears to have been waiting for:
And SCOTUS is likely to get involved, as the circuit split creates a massive conflict; sports contracts are now treated as traditional sports bets (regulated by states) in the Ninth Circuit and as federally preempted swaps in the Third Circuit. Further, the question at hand is an extremely important one: Does the CFTC have exclusive jurisdiction over a product (that generates billions of dollars) that has traditionally been regulated at the state level as gambling?
The billion-dollar question is: When will SCOTUS take the case?
Whether it is granted for the 2026–27 term or slips to 2027–28 will depend on how quickly the parties move and whether the Court wants to wait for other circuits to issue a ruling.
Kalshi’s Options
There is a caveat to all of this, as Kalshi could first seek en banc rehearing in the Ninth Circuit, which, if granted, would add months to the process. En banc review is rarely granted, and a unanimous 3-0 decision from the Ninth Circuit panel makes a reversal even less likely.
As attorney Daniel Wallach noted:
And if you want to know why this is an extremely important development, look no further than this:
There is also a subplot:
