The 9th U.S. Circuit Court of Appeals ruled that Nevada can regulate Kalshi’s sports-event contracts under state gaming laws, dealing a blow to the prediction market operator and creating a split among federal appeals courts.
In a 3-0 decision, the San Francisco-based court said Kalshi was unlikely to show that the federal Commodity Exchange Act pre-empts Nevada from requiring a gaming licence for contracts tied to sporting events.
“The substance of the sports event contracts offered on Kalshi’s (exchange) is sports gambling, regardless of whether Kalshi calls them swaps,” the appeals panel said. “Kalshi’s attempts to distinguish its sports event contracts from sportsbooks betting are unpersuasive.”
The court also described as “disingenuous” Kalshi’s argument that its products were not sports betting while the company had used similar terminology in its marketing.
The decision conflicts with an April 6 ruling by the 3rd U.S. Circuit Court of Appeals, which held that New Jersey could not apply its gaming laws to Kalshi’s platform. The differing decisions create a circuit split that could increase the likelihood of the issue reaching the U.S. Supreme Court.
“Despite the Ninth Circuit’s opinion, we still believe the CFTC regulations as written do not prohibit sports contracts, and in any event, the CFTC is working to clarify those regulations,” Kalshi spokeswoman Dani Lever said. “We will be seeking further review.”
The company has maintained that trading on its federally licensed exchange falls under federal jurisdiction rather than a patchwork of state gambling laws.
Kalshi has said trading on sports, entertainment and election contracts is blocked in Nevada. Nevada Gaming Control Board agents, however, have said they were able to continue accessing the site from within the state.
Nevada regulators are also seeking to have Kalshi held in contempt and impose a previously ordered $120,000 daily penalty.
Nevada Gaming Control Board Chairman Mike Dreitzer welcomed the ruling, saying it supported the regulator’s longstanding 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. We will continue to vigorously enforce Nevada law to safeguard gaming in our state.”
Nevada Governor Joe Lombardo said prediction markets offering sports-event contracts constituted gambling and must comply with the state’s gaming laws and regulatory framework.
He said the ruling would help “safeguard the integrity of our gaming industry.”
The dispute is part of a broader legal battle over whether prediction markets, which offer contracts tied to outcomes ranging from sports and elections to entertainment, weather and financial indicators, should be regulated exclusively at the federal level or under state gambling laws.
Kalshi has faced legal challenges in several states. Courts in Maryland, Nevada, Ohio, New York and Wisconsin have ruled against the company in similar disputes, while judges in New Jersey, Tennessee, Arizona and Minnesota have sided with it. Other states have been allowed to restrict parts of its operations without imposing complete bans.
The Ninth Circuit ruling is binding precedent for federal courts in its jurisdiction, including California, Arizona and several other western states.
Prediction markets have expanded rapidly, with Kalshi reporting billions of dollars in weekly trading volume, much of it linked to sports markets. Forty-four states have argued that such platforms amount to gambling and should be subject to state gaming laws and taxes.
Dustin Gouker, an independent journalist covering the prediction industry, said the ruling marked a significant setback for Kalshi.
“It’s the first ruling against Kalshi at the appellate level, and the opinion seemed to be pretty brutal for the company,” Gouker said. “This gets us one step closer to an almost inevitable Supreme Court case on the legality of sports event contracts.”