The 9th Circuit Told Kalshi Its Sports Contracts Are Bets: 'Regardless of Whether Kalshi Calls Them Swaps'

A federal appeals court ruled Friday that Kalshi's sports event contracts are gambling under Nevada law, handing states a major win in a fight over who gets to regulate prediction markets and setting up a split between circuits that lawyers on both sides expect the Supreme Court to resolve.

Writing for the 9th U.S. Circuit Court of Appeals, Judge Ryan Nelson concluded that the contracts constitute "sports gambling, regardless of whether Kalshi calls them swaps." The court rejected the company's core argument — that because it operates as a designated contract market registered with the Commodity Futures Trading Commission, its products are federally regulated financial instruments and states are preempted from touching them.

The reasoning matters more than the label. Kalshi's business model rests on characterizing a wager on a game's outcome as an event contract, economically equivalent to a derivative and therefore within the CFTC's exclusive jurisdiction. The 9th Circuit's answer was that the substance of the instrument, not its paperwork, controls — and that a contract whose payoff depends entirely on which team wins is a sports bet subject to Nevada's gaming statutes.

That is the opposite of what the 3rd Circuit held in April, when it found the CFTC has exclusive control over Kalshi's sports contracts and blocked New Jersey from enforcing its own rules. Two federal appeals courts now disagree on the same question about the same products, which is the classic condition for Supreme Court review.

Kalshi spokesperson Dani Lever said the company believes "the CFTC regulations, as written, do not prohibit sports contracts" and signaled it would seek further review. The Nevada Gaming Control Board said the ruling "vindicates what we have been saying all along." Dominick Freda of Better Markets, a financial-reform advocacy group, called the decision "a decisive win for the rule of law and for every state."

Roughly 20 states are litigating some version of this dispute. New York sued Kalshi on Aug. 1, calling the platform plain gambling and demanding triple its revenue from state residents. The stakes are not only regulatory: state-licensed sportsbooks pay gaming taxes, fund problem-gambling programs and submit to state age verification and advertising rules. A federally regulated event contract, offered nationwide from a single registration, bypasses all of it — including in the states that have never legalized sports betting at all.

The industry has grown fast in that gray zone. Prediction markets took in billions in volume across the 2025 and 2026 sports calendars, and the CFTC, which would be the enforcing agency under Kalshi's own theory of the law, has not issued a single enforcement action since January. Friday's ruling does not shut the platform down, but it removes the assumption the whole model was built on: that one federal license was enough.