A federal appeals court has ruled that Nevada gaming regulators can oversee Kalshi’s sports event contracts, rejecting the platform’s attempt to block state regulation and raising new questions about federal and state authority
Nevada’s authority to regulate sports event contracts offered by Kalshi was upheld Friday by the Ninth U.S. Circuit Court of Appeals, which ruled unanimously that the Commodity Exchange Act (CEA) does not prevent the state from applying its gaming regulations to these contracts. The decision means Kalshi, a federally regulated prediction market, cannot block the Nevada Gaming Commission from overseeing its sports-related event contracts, even though Kalshi argued that only the Commodity Futures Trading Commission (CFTC) should have jurisdiction.
Federal and State Regulatory Conflict
The dispute centers on whether Kalshi’s sports event contracts are financial instruments regulated exclusively by the CFTC or if they are, in effect, sports bets subject to state gaming laws. Kalshi maintained that its contracts are “swaps” and futures contracts, which would place them solely under federal oversight. However, the Ninth Circuit panel found that, under the CEA’s definitions, these contracts are not swaps but are instead considered sports bets, making them subject to Nevada’s gaming regulations.
Court Ruling and Industry Response
The Ninth Circuit’s 3-0 decision affirmed a lower court’s ruling dissolving a preliminary injunction that had temporarily blocked Nevada regulators from acting. The panel concluded that the CEA does not expressly pre-empt state regulation of sports event contracts when those contracts are classified as gaming. Nevada Gaming Control Board Chairman Mike Dreitzer welcomed the decision, emphasizing the state’s responsibility to regulate sports betting and protect the integrity of its gaming market. The American Gaming Association also supported the outcome, calling it a win for consumer protection and state regulatory authority.
Split with Third Circuit and Supreme Court Implications
This ruling creates a direct split with the Third U.S. Circuit Court of Appeals, which in April found that New Jersey could not regulate Kalshi’s platform, reasoning that the CEA gave exclusive oversight to the CFTC for such contracts. The conflicting appellate decisions increase the likelihood that the U.S. Supreme Court may be asked to resolve whether states or the CFTC have the final say over prediction markets offering sports event contracts. New Jersey has until September 3 to petition the Supreme Court for review in its ongoing legal battle with Kalshi.
Next Steps for Kalshi and Nevada
Kalshi has indicated it will seek further review of the Ninth Circuit’s decision, arguing that federal law should shield its operations from state intervention. Meanwhile, the case has been sent back to the district court to address Nevada’s separate challenges to Kalshi’s election contracts, which remain unresolved. The regulatory landscape for prediction markets remains unsettled, with operators, regulators, and courts continuing to debate the boundaries between financial products and gambling under U.S. law. For context on how regulatory enforcement can impact operators, a recent case involving self-exclusion failures in the UK led to significant penalties for Holland Park Leisure, as detailed in this report on operator compliance and consumer protection.
Understanding the distinction between event contracts and traditional sports bets is essential for interpreting these legal disputes. Event contracts, as offered by platforms like Kalshi, allow users to buy and sell positions on the outcome of specific events, such as the result of a sports game or an election. While these contracts can resemble financial derivatives, U.S. law draws a line between financial instruments regulated by the CFTC and wagers regulated by state gaming authorities. The classification of a contract as a “swap” or a “bet” determines which regulator has jurisdiction, a question that remains at the heart of ongoing litigation and regulatory debate.
