BUSINESS
The Ninth Circuit Just Split the Prediction Market Map
A 3-0 Ninth Circuit ruling leaves Kalshi live in California while handing Nevada’s sports-bet playbook to the states that supply most of its volume.
A Ninth Circuit panel ruled Friday that Kalshi sports contracts are bets, not federal swaps, so Nevada can treat the prediction market as gambling. The 3-0 decision in KalshiEX LLC v. Assad leaves the same product shielded in New Jersey, where the Third Circuit went the other way in April. Kalshi is still live in California, the largest state with no legal sportsbooks, and that gap is now the fight.
Crypto.com’s North American Derivatives Exchange and Robinhood Derivatives lost companion bids the same day. Kalshi said it will seek further review. New Jersey is already on a Supreme Court clock of its own.
Three Trump Appointees Called the Contracts Sports Bets
Judge Ryan D. Nelson wrote for a panel that also included Judges Bridget S. Bade and Kenneth K. Lee, all appointed by President Donald Trump. They heard argument in San Francisco on April 16 and published on August 28. The Commodity Futures Trading Commission had filed an amicus brief on Kalshi’s side. The judges still backed Nevada.
Kalshi is a designated contract market, a federally licensed exchange. It argued that its sports event contracts are “swaps” under the Commodity Exchange Act, which would give the CFTC exclusive say and lock the states out. Nobody disputed that the contracts trade on that exchange. The panel said they still are not swaps, because they are sports bets.
Nelson opened from Kalshi’s own ads. The company, he wrote, bills itself as “the first app for legal sports betting in all 50 states.” He quoted Romeo and Juliet on a rose by any other name, then wrote that placing sports bets, even when called by another name, is still gambling. The broad reading Kalshi wanted, the court said, “knows no limiting principle because anything could be defined as an event.”
For Kalshi to deny that its sports event contracts are sports bets under a reasonable person’s understanding is disingenuous. That sports event contracts are, in reality, sports bets is not just an ‘I know it when I see it.’ Rather, everyone, including Kalshi, knows it when they see it.
Judge Ryan D. Nelson, U.S. Court of Appeals for the Ninth Circuit, KalshiEX LLC v. Assad
Lee joined the result and wrote separately that few people would call the New York Mets’ latest loss an “event,” and that one game in a 162-game season is a stretch as a financial consequence. He said some unique sports events might still fit the statute. He did not need to decide that now, he wrote, because current CFTC rules already bar gaming contracts.
The panel affirmed the order dissolving Kalshi’s injunction on sports contracts and sent election contracts back to U.S. District Judge Andrew P. Gordon. Those election markets, the court said, are a fraction of the business. Sports is the rest.
The Same Statute Now Means Two Different Things
In April the Third Circuit, in KalshiEX LLC v. Flaherty, 172 F.4th 220, voted 2-1 that Kalshi’s sports contracts likely are swaps traded on a licensed exchange, so New Jersey cannot enforce its gaming laws against them. Judge David Porter wrote for the majority. Judge Jane R. Roth dissented, calling the products “virtually indistinguishable” from a sportsbook.
Friday’s panel went out of its way to disagree. The Ninth Circuit said its sister circuit “essentially disregarded” the current federal bar on listing gaming-related contracts when it treated the CFTC’s silence as permission. Both rulings are still at the injunction stage. Neither is a final judgment on the merits. They are already enough to put the identical product under two federal answers.
TWO CIRCUITS, TWO ANSWERS
| Item | Third Circuit (April 6) | Ninth Circuit (Aug. 28) |
|---|---|---|
| Case | KalshiEX LLC v. Flaherty (New Jersey) | KalshiEX LLC v. Assad (Nevada) |
| Vote | 2-1 | 3-0 |
| Sports contracts | Likely swaps | Sports bets, not swaps |
| State gaming law | Likely preempted | Applies |
| Immediate result | New Jersey stays blocked | Nevada can enforce; freeze lifted |
CFTC spokesman Zach Fulton said Friday that the Ninth Circuit’s published opinion “erred” and invented a new exception in the Commodity Exchange Act. “The Ninth Circuit has now teed up a circuit split that calls out for resolution by the Supreme Court,” he said. New Jersey has until early September to petition from Flaherty; Reuters dated that deadline September 3, while an August 26 law-firm advisory cited September 4.
Kalshi spokeswoman Dani Lever tried to salvage a sliver of agreement. “The Ninth Circuit agreed with the Third Circuit on a fundamental point: federal law prevents states from regulating trading on a federally licensed exchange, like Kalshi,” she said. Then the rest of the holding: the sports contracts are not that kind of trading.
Kalshi Built Its Book in States With No Sportsbooks
The legal theory only mattered because the sports book got huge. DeFi Rate’s Kalshi’s 2026 volume dashboard, updated August 28, puts year-to-date trading at $173.09 billion. June ran $32.67 billion as the World Cup landed. July hit $41.12 billion. August was at $33.50 billion with a few days left, off about 10 percent from July.
KALSHI VOLUME THIS SUMMER
| Month | Platform volume |
|---|---|
| June 2026 | $32.67 billion |
| July 2026 | $41.12 billion |
| August 2026 (through the 28th) | $33.50 billion |
| 2026 year to date | $173.09 billion |
Sports have done most of that work. An Arnold & Porter advisory this week said sports contracts have accounted for about 80 percent of Kalshi volume since July 2024. DeFi Rate’s category split puts the share above 80 percent on a monthly basis. Kalshi told CoinDesk in July that World Cup-specific volume had already reached $22.42 billion, a figure that likely included combo markets; a DeFi Rate contract-level review found at least $13.76 billion without those combos.
The customers are not mainly in Las Vegas. Eilers & Krejcik Gaming, in an April monitor reported by Sports Business Journal, estimated that the 19 states without legal online sports betting delivered 69 percent of Kalshi’s volume, with California and Texas alone at 43 percent. Add Georgia, Florida, and Washington, and the firm’s model got to 61 percent. Kalshi does not publish state-level volume. EKG used search and ad tracking as a proxy and called the estimate medium-confidence.
In states with more than three licensed sportsbooks, EKG put Kalshi’s share of a handle analog under 3 percent. The product was never primarily a raid on DraftKings’ New Jersey book. It was a federal on-ramp into California and Texas, where a sportsboard still is not legal.
Who Can Shut Kalshi Down After Friday?
The opinion binds federal judges in the Ninth Circuit, which covers Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington. It does not, by itself, turn the app off in those states. It tells district judges how to read the statute when a state moves.
Nevada already had Kalshi boxed in. The New York Times reported that in July Kalshi agreed to keep Nevada users off sports, elections, and entertainment contracts. Friday’s ruling keeps that freeze in place and blesses the Gaming Control Board’s theory for the sports piece. Mike Dreitzer, the board’s chair, said the decision “completely vindicates what we have been saying all along.” Gov. Joe Lombardo said prediction markets offering sports-event contracts “constitute gambling and must comply with Nevada’s gaming laws and regulatory framework.”
Independent journalist Dustin Gouker, who covers the industry, called it the first appellate loss for Kalshi and said the opinion “seemed to be pretty brutal for the company.” Sportico reported that DraftKings and FanDuel shares jumped more than 5 percent after the decision, which is the read you would expect if licensed books thought a federal loophole had just narrowed. A blocked state does not typically wipe open trades; the practical next step is close-only, where holders can sell or wait for expiry. That is cold comfort in California, where the next enforcement letter would hit the actual customer base.
CBS Sports still listed California as live on Friday evening. Action Network’s state guide, updated August 29, still had the app open there while listing Arizona, Illinois, Massachusetts, Maryland, Michigan, Montana, Nevada, Ohio, and Washington among the places you cannot trade. The Ninth Circuit did not geo-fence the West. It handed a brief to the AGs who already wanted to.
Casinos, Tribes and DraftKings Catch a Break
The docket showed who had skin in the outcome. The Nevada Resort Association intervened. The Indian Gaming Association, the National Congress of American Indians, and a long list of tribes and tribal gaming groups filed as amici. So did New Jersey, Ohio, 37 other states, and the District of Columbia.
California Attorney General Rob Bonta signed that states’ brief. So did the attorneys general of Washington, Arizona, Oregon, Alaska, Hawaii, and Idaho. Several of the Ninth Circuit’s own chief law officers are already on paper with Nevada, including the AG in the state that EKG says is Kalshi’s largest unregulated pool.
WHO SHOWED UP WITH NEVADA
- State AGs: New Jersey, Ohio, 37 other states, and Washington, D.C., filed a joint amicus brief backing Nevada’s power to treat the contracts as gambling.
- Tribal operators: The Indian Gaming Association and more than 20 tribes and tribal gaming groups argued that a federal end-run would cut into sovereign gaming compacts.
- The Strip: The Nevada Resort Association came in as an intervenor, not a bystander, to defend the licensed casino market.
- Problem-gambling groups: The Nevada Council on Problem Gambling and the Dr. Robert Hunter International Problem Gambling Center filed on Nevada’s side.
Nicole Saharsky of Mayer Brown, who argued for the Gaming Control Board, told Reuters the court confirmed “that states regulate sports betting, and the CFTC has nothing to do with it.” Nevada’s statement on the ruling said the panel “emphatically reject[ed] the view that the federal Commodity Exchange Act preempts application of Nevada’s gaming laws” to sports-event contracts from Kalshi, Crypto.com, and Robinhood.
Polymarket was not a party. It is still the second-largest prediction site in the United States, and it now lives under the same split. Utah already handed Kalshi a merits loss on August 4 in KalshiEX LLC v. Cox, a summary judgment the company appealed to the Tenth Circuit the next day. The map was patchwork before Friday. It is now patchwork with a western appellate stamp on the state side.
A Federal Gaming Ban Is Still on the Books
Kalshi’s remaining federal argument is that the CFTC’s own rules do not, in practice, stop sports contracts, and that the agency is about to say so out loud. Lever put it this way: “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.”
The rule the court applied is not a draft. A CFTC rule that bars gaming contracts, 17 C.F.R. § 40.11(a)(1), says a registered entity shall not list or clear a contract based on an excluded commodity that “involves, relates to, or references terrorism, assassination, war, gaming, or an activity that is unlawful under any State or Federal law.” Exchanges can self-certify a new contract and list it the next business day. The commission can review it later. The Ninth Circuit said Kalshi’s self-certification of these sports contracts was unlawful under that rule and under the Commodity Exchange Act’s Special Rule on gaming.
In June the CFTC proposed amendments that 44 state attorneys general, in a July 27 letter, said would define gaming in a way that would “permit sports betting and other gambling contracts” on these exchanges. Lee’s concurrence flagged that rewrite and said it does not matter yet. “While CFTC has proposed revising that regulation, it remains in the books and controls the outcome of this appeal,” he wrote. Friday’s panel used the same line: the existing regulation controls, and the CFTC’s pending rewrite of that rule is someone else’s problem for another day.
That is the second crack in the national-license story. Even if the Supreme Court later says these contracts can be swaps, the agency’s own gaming bar is still sitting on the shelf until it is actually changed. Kalshi is asking courts to treat a proposed rewrite as if it had already happened.
California Is Still Live, for Now
Kalshi can still take sports trades from California this weekend. The company’s home-court theory was that one CFTC license traveled into every zip code. After Friday it does not travel in Nevada, and it is weaker everywhere a Ninth Circuit judge sits. The Third Circuit still says the opposite for New Jersey. Utah has a merits judgment the other way. The CFTC is in court against states and, at the same time, trying to rewrite the gaming rule those states just used.
Lever said Kalshi will seek further review. Fulton said the split belongs at the Supreme Court. Between those two filings sits the state that never legalized a sportsbook and already supplies, on EKG’s math, a huge share of the action. California’s attorney general has signed the brief. The app has not gone dark. That is the next case, and it is no longer hypothetical.
Disclaimer: This article is news reporting and analysis of a court decision and related market figures. It is for information only. It is not legal advice, investment advice, or a recommendation to bet, trade event contracts, or buy or sell any stock, including shares of sportsbook operators or platforms named here. Readers who are considering a wager, a prediction-market trade, or an investment should consult a licensed attorney, a registered financial adviser, or both, and should check their own state’s gaming and securities rules before acting. Volumes, case statuses, share-price moves, and product availability are those reported by the cited sources as of August 29, 2026, and can change with new orders, listings, or filings.
