Kalshi loses 3-0 appeals ruling as Nevada wins prediction market fight

A federal appeals court ruled Kalshi cannot block Nevada gaming regulators, creating a circuit split that raises odds of Supreme Court review.

The 9th U.S. Circuit Court of Appeals ruled 3-0 that Kalshi cannot block Nevada gaming regulators from overseeing its prediction markets, rejecting federal preemption claims.

"The CFTC is not a national gambling regulator," Circuit Judge Ryan Nelson wrote in the opinion. "No one suggested it was until over a decade after the law was passed."

The ruling contradicts a 3rd U.S. Circuit Court of Appeals decision in Philadelphia that said New Jersey cannot regulate Kalshi's platform, creating a circuit split that increases the likelihood of U.S. Supreme Court review. At least four states — Nevada, Massachusetts, Michigan and Washington — have won court orders restricting Kalshi's activities, while judges in New Jersey, Tennessee, Arizona and Minnesota have sided with the company.

Kalshi said it will seek further review, and New Jersey has until September 3 to appeal the 3rd Circuit decision. The outcome will determine whether states or the CFTC control the fast-growing prediction markets industry, which has expanded beyond sports to elections, economics, weather and cultural events.

The ruling upholds a November 2025 decision by Chief Judge Andrew Gordon in Las Vegas federal court that dissolved an injunction allowing Kalshi to offer sports event contracts in Nevada. The appeals court returned the case to Gordon to review Kalshi's election contracts, which Nelson said are illegal under Nevada law.

Kalshi representative Dani Lever said the company disagrees with the ruling. "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," Lever said. "We will be seeking further review."

Nevada Gaming Control Board Chairman Mike Dreitzer called the ruling a vindication. "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."

The board is seeking a $120,000 daily penalty against Kalshi for allegedly failing to geofence its operations and make itself unavailable to Nevada consumers. Kalshi says it has complied, but the Control Board disagrees and is asking a Carson City court to find the company in contempt.

Circuit split sets up Supreme Court showdown

The 9th Circuit's decision creates a direct conflict with the 3rd Circuit's April 6 ruling, which said in a split decision that New Jersey cannot regulate Kalshi's platform. The CFTC, under the Trump administration, has claimed exclusive oversight of prediction markets and has challenged regulatory activity in nine states.

Arizona Attorney General Kris Mayes, who filed criminal charges against Kalshi in March accusing it of running an illegal gambling business, welcomed the ruling. "Calling a sports bet a 'swap' doesn't make it one," Mayes said. "Financial reform legislation was never intended to strip states of their traditional police power over gambling."

The American Gaming Association also praised the decision. "This ruling is a significant win for consumer protections and taxpayers," AGA President and CEO Bill Miller said. "It is a big loss for Kalshi and other backdoor sports gambling operations who defy state law."

The ruling has drawn attention beyond the gaming industry. Ripple CTO Emeritus publicly criticized Kalshi's CFTC argument, saying the company's position that sports event contracts constitute "swaps" under the Dodd-Frank financial reforms stretches the statute beyond its intended scope.

Prediction markets offered by Kalshi, Polymarket, Coinbase and Gemini Titan have grown rapidly since the 2024 U.S. presidential election, when they outperformed pollsters in predicting Donald Trump's victory. Kalshi's platform alone allows wagers on elections, economics, weather and cultural events such as the Oscars.

Nicole Saharsky, a lawyer with Mayer Brown who argued the case for the Nevada Gaming Control Board, said the ruling confirms state authority. "The court confirmed what has been clear since the beginning — that states regulate sports betting, and the CFTC has nothing to do with it," Saharsky said.

This article is for informational purposes only and does not constitute investment advice.