Ninth Circuit Hands Nevada the Kalshi Sports Bet Fight

A unanimous Ninth Circuit panel ruled Friday that Kalshi’s sports event contracts are sports bets subject to Nevada gambling laws, not “swaps” under the Commodity Exchange Act, dissolving the company’s injunction and handing state regulators a clear win over the prediction-market platform.

The decision in KalshiEX LLC v. Assad creates an open circuit split with the Third Circuit’s April holding that the same contracts are federally preempted swaps. CFTC spokesman Zach Fulton said the split “calls out for resolution by the Supreme Court.”

That split now frames every later filing in the remaining circuits. Platforms that once sought a single federal shield must litigate state by state while the definitional fight travels upward.

What the Ninth Circuit Held

Judge Ryan D. Nelson, joined by Judges Bridget S. Bade and Kenneth K. Lee, affirmed the district court’s decision to dissolve a preliminary injunction that had blocked the Nevada Gaming Control Board from enforcing state statutes against Kalshi’s sports offerings. Crypto.com and Robinhood faced parallel outcomes in related matters.

The panel held that Kalshi failed to show a likelihood that the CEA preempts Nevada’s gaming rules as applied to these contracts. Under the statutory definition, the contracts were not swaps “because they were sports bets.” Nelson wrote that a rose by any other name is still a rose, and sports bets called event contracts remain gambling.

We are pleased with the Ninth Circuit’s ruling today in favor of Nevada. This completely vindicates what we have been saying all along. This is sports betting and needs to be properly regulated by the state.

Mike Dreitzer, Chairman, Nevada Gaming Control Board

The court rejected express, conflict and field preemption arguments. It noted that current CFTC regulation 17 C.F.R. § 40.11 categorically prohibits contracts related to gaming, so Kalshi’s self-certification and listing of the sports contracts was unlawful under existing rules. The full holding appears in the full Ninth Circuit opinion text.

• Express preemption: no statutory text placed these sports contracts beyond state gaming codes.
• Conflict preemption: state enforcement did not clash with any CEA command once the contracts fell outside the swap definition.
• Field preemption: the panel found no congressional intent to occupy ordinary sports wagering as a federal field.

Judge Lee concurred. He agreed the more natural reading of “event” excludes ordinary sports outcomes and that a single Mets loss does not carry the financial, economic or commercial consequence expected of a swap. He left open whether some unique sports events could ever qualify, but said the existing regulation bars the contracts for now.

That concurrence narrows the holding to ordinary game results while leaving a theoretical door ajar. For Nevada regulators, the practical effect is immediate: sports offerings already listed through self-certification lose their federal cover inside the circuit.

Third Circuit Went the Opposite Direction in April

In April the Third Circuit, in a 2-1 decision written by Judge David Porter and joined by Chief Judge Michael Chagares, affirmed a preliminary injunction blocking New Jersey from enforcing its sports-wagering laws against Kalshi. Judge Jane Richards Roth dissented, calling the product branding an act of alchemy.

That court treated the sports event contracts as swaps traded on a CFTC-designated contract market and therefore subject to exclusive federal jurisdiction. New Jersey has a short window remaining to seek further review of that ruling.

The CFTC had appeared as amicus supporting the platforms’ preemption claim. Fulton said after the Ninth Circuit decision that “a derivative contract structured as a swap is a swap regardless of the underlying subject matter” and that the only statutory exceptions are onions and movie box-office receipts. He accused the panel of inventing a new exception.

The two panels read the same statute and the same contracts. One treated market designation and contract form as decisive. The other treated the underlying activity, a bet on a sports outcome, as decisive. Roth’s dissent in the Third Circuit previewed the Ninth Circuit’s emphasis on substance over label.

Who Gains and Who Loses Right Now

Nevada’s attorney general and Gaming Control Board secured the immediate ability to treat the platforms as unlicensed operators. Governor Joe Lombardo praised the board for upholding standards that protect the state’s gaming industry. Licensed casinos and the Nevada Resort Association, which intervened, keep their regulated channel free of unlicensed digital competitors inside the state.

• State gaming boards and AGs gain enforcement tools and precedent in the largest western circuit.
• Licensed sports books and tribal gaming interests protect tax bases, integrity rules and licensing moats that prediction markets had bypassed.
• Kalshi, Crypto.com and Robinhood lose the nationwide federal-shield argument inside Ninth Circuit states and must keep geo-restrictions or face cease-and-desist actions.
• CFTC sees its exclusive-jurisdiction claim rejected here and must now litigate the split while its own Rule 40.11 modernization proposal remains unfinished.

Kalshi spokeswoman Dani Lever said the company still believes CFTC rules do not prohibit sports contracts and “will be seeking further review.” She noted the Ninth Circuit agreed with the Third Circuit that federal law prevents states from regulating trading on a federally licensed exchange, even while it disagreed on the swap definition itself.

That partial agreement matters. If a contract is a swap on a designated market, states step back. If it is not a swap, state gaming statutes apply. The entire dispute turns on which side of that line sports event contracts fall.

Twenty states remain locked in related litigation. The issue also sits in the Second, Fourth, Sixth and Seventh Circuits. A Nevada Gaming Control Board press release framed the outcome as a 70-year continuity of state oversight.

Billions Already Move Through These Sports Contracts

Prediction markets have drawn billions of dollars in 2026 trading, with sports dominating volume. One recent week saw combined Kalshi and Polymarket volume above $3.3 billion, sports accounting for roughly three-quarters of the flow. Kalshi alone has posted multi-billion-dollar sports weeks during the World Cup and NBA Finals periods, with some daily sports peaks reported near or above $1 billion.

Sports share of recent weekly volume: about 76 percent.

Kalshi lifetime sports-related scale: tens of billions of dollars in notional volume according to public API trackers.

Fee revenue tilt: sports have driven the large majority of platform fees in recent periods.

Those figures explain why states treat the product as direct competition with licensed books and why platforms fight so hard for a single federal rule set. Geo-blocking Nevada users from sports, elections and entertainment contracts, which Kalshi already agreed to do in July, becomes permanent under this ruling unless higher courts reverse it.

Volume concentration also explains the urgency on both sides. When sports supply most fees and most notional flow, a state-level ban removes the core product, not a side line. Licensed books see the same dollars as wagers that should clear through their taxed and surveilled channels.

Self-Certification and the Rule That Still Bans Gaming

Designated contract markets may self-certify new contracts to the CFTC and list them the next business day. The agency can later review and disallow. That process let sports event contracts reach users quickly even while 17 C.F.R. § 40.11 still prohibits gaming-related swaps.

The Ninth Circuit treated the existing regulation as controlling. It criticized the Third Circuit for essentially disregarding the prohibition. In June the CFTC under Chairman Michael S. Selig advanced a CFTC proposal to modernize Rule 40.11 that would define “gaming,” set public-interest factors, and likely permit many professional and collegiate sports contracts that carry surveillance and sports-body coordination. Forty-four state attorneys general have already written in opposition to any reading that would open the door wider.

1. 2025: Nevada Gaming Control Board issues cease-and-desist to Kalshi over sports and election contracts.
2. Early 2026: District court initially grants then dissolves Kalshi’s injunction after related Crypto.com developments.
3. April 6, 2026: Third Circuit affirms Kalshi’s New Jersey injunction, calling the contracts swaps.
4. June 2026: CFTC proposes amendments to Rule 40.11.
5. July 2026: Kalshi restricts Nevada users from sports, elections and entertainment.
6. Aug. 28, 2026: Ninth Circuit affirms dissolution of the sports injunction and remands elections.

Earlier federal moves, including earlier CFTC emergency orders on Kalshi, had already tested the outer edges of state-federal conflict.

Self-certification sped listings. It did not repeal Rule 40.11. The Ninth Circuit treated that sequence as fatal to the preemption claim: a platform cannot self-certify into a category the rule still bars and then demand that states stand down.

Elections Still Sit on Remand and Other Circuits Remain Live

The panel sent Kalshi’s election contracts back to the district court for fresh analysis under the same reasoning. Those contracts form a smaller share of volume but carry separate political and statutory sensitivities. Nevada argues they also violate state law.

Parallel fights continue. A Minnesota judge previously blocked a state ban, prompting tribal concerns that appear in the Minnesota prediction market ban fight. New York City has probed advertising. The White House has hosted crypto and prediction-market discussions even as the suits multiply. Each venue adds another data point for eventual Supreme Court briefing.

Kalshi and the CFTC now face a practical map in which sports contracts are freely offered in Third Circuit territory, restricted or banned in Ninth Circuit states that choose to act, and contested everywhere else. Platforms can keep listing in friendly jurisdictions and block restricted ones, yet the compliance and product-fragmentation costs rise with every adverse ruling.

The Split Forces a Two-Track Compliance Map

Until the Supreme Court or Congress resolves the definition, operators must run parallel product plans. In Third Circuit states the federal-shield theory still holds under existing precedent. In Ninth Circuit states that choose to enforce, sports contracts face gaming statutes and the geo-blocks already in place in Nevada become the model.

Elsewhere the Second, Fourth, Sixth and Seventh Circuits remain live, and twenty states continue related cases. Each new district ruling feeds the eventual certiorari petition Fulton and state officials both expect.

• Friendly precedent zone: list sports contracts and rely on CEA preemption arguments drawn from the Third Circuit.
• Adverse precedent zone: maintain geo-restrictions, treat state cease-and-desist letters as binding, and await higher review.
• Open circuits: litigate or settle case by case while monitoring Rule 40.11 modernization and the forty-four attorneys general opposed to a wider reading.

Fragmentation raises costs even when volume stays high. Surveillance partnerships, tax treatment, and integrity rules differ when one state sees a swap and another sees a sports book. Licensed casinos and tribal operators gain from that friction; platforms lose the simplicity of a 50-state pitch.

Why Further Review Now Looks Inevitable

The Ninth Circuit and Third Circuit cannot both be right about the same contracts under the same statute. Fulton cast the split as one that requires Supreme Court resolution. State officials, armed with Nevada’s win and the Gaming Control Board’s 70-year continuity framing, have equal reason to seek a national answer rather than a permanent patchwork.

Lever’s statement that Kalshi will seek further review keeps the company’s path open. New Jersey’s short window on the Third Circuit side means both halves of the split could move upward on similar timelines. The unfinished Rule 40.11 proposal adds a regulatory track beside the judicial one, but forty-four state attorneys general have already signaled resistance to any modernization that widens access.

For now the holding is local and concrete. Nevada may enforce. The injunction is gone. Sports event contracts labeled as swaps still read as sports bets inside the Ninth Circuit.

Fulton and state officials both treat the Supreme Court as the logical next stop. Until then, Nevada’s gaming board holds the enforcement pen inside its borders, and the sports contracts that once advertised themselves as legal in all 50 states operate under a patchwork the Ninth Circuit just made permanent for the near term.