The Ninth Circuit Splits Kalshi’s Sports Map in Two

A three-judge Ninth Circuit panel ruled 3-0 on August 28 that Kalshi’s sports event contracts are sports bets Nevada can police, not federal “swaps.” The same product remains under a federal shield in New Jersey, where another appeals court went the other way in April.

New Jersey has until Thursday, September 3, to ask the Supreme Court to take that earlier case. Until the justices pick a side, sports prediction markets run on two maps, and licensed books in the West just got a tool they can use now.

The West Now Treats Sports Contracts as Bets

KalshiEX, LLC, a CFTC-licensed designated contract market, argued that the Commodity Exchange Act gives the Commodity Futures Trading Commission sole power over its sports event contracts. Nevada’s Gaming Control Board said the contracts were an unlicensed sports pool. Judge Ryan D. Nelson, writing for Judges Bridget S. Bade and Kenneth K. Lee, all appointed by President Donald Trump, held that Kalshi had not shown federal law likely blocks Nevada’s gaming rules on those sports contracts.

The 50-page opinion issued August 28 affirms, in part, District Judge Andrew P. Gordon’s decision to lift an early freeze that had stopped Nevada from enforcing its rules. The panel remanded only the fight over election contracts. Appeals from Crypto.com’s North American Derivatives Exchange and Robinhood Derivatives were rejected on the sports product as well.

HOW TWO APPEALS COURTS SPLIT

Nelson’s panel agreed that federal law does block states from regulating actual swaps traded on a licensed exchange. The sports contracts failed that test, the judges said, because they are sports bets. Binding precedent now runs through California, Arizona, Nevada and the rest of the Ninth Circuit, a band of Western states that have already pushed to treat these markets as gambling.

New Jersey Still Shields the Same Product

On April 6, the Third Circuit, in a 2-1 decision by Judge David J. Porter, left in place an order stopping New Jersey from applying its gaming laws to Kalshi’s sports-related event contracts. The April ruling that shielded Kalshi in New Jersey treated those contracts as swaps under the CFTC’s exclusive watch. Judge Jane R. Roth dissented, writing that the offerings looked virtually indistinguishable from sportsbook products.

The two holdings can both be true in their own circuits at the same time. A trader in Newark still deals in a federal product. A trader in Las Vegas is, on the Ninth Circuit’s view, placing a sports bet that needs a state license Kalshi does not hold. Kalshi spokeswoman Dani Lever said the San Francisco court “agreed with the Third Circuit on a fundamental point: Federal law prevents states from regulating trading on a federally licensed exchange, like Kalshi.” She added that the company still believes current CFTC rules do not bar sports contracts, that the agency is working to clarify those rules, and that Kalshi “will be seeking further review.”

Independent journalist Dustin Gouker, who covers the prediction business, called the Nevada decision the first appellate loss for Kalshi and said the opinion “seemed to be pretty brutal for the company.” The brutality is the map, not a national shutdown. Kalshi can keep listing sports contracts where a sister circuit still calls them swaps. It cannot lean on that label inside the Ninth Circuit without inviting a cease-and-desist the appeals court has now blessed.

Kalshi’s Own Ads Became Exhibit A

Nelson opened with Kalshi’s marketing, not with a statute. “KalshiEX, LLC advertises itself as ‘the first app for legal sports betting in all 50 states,’” he wrote. The board’s cease-and-desist followed after volume on what Kalshi itself billed as a sports-betting platform ballooned. In court, the company said it was not a sports-betting app at all, but a federal exchange offering event contracts. The panel found that pivot unpersuasive.

Thus, for Kalshi to deny that its sports event contracts are sports bets under a reasonable person’s understanding is disingenuous.

Judge Ryan D. Nelson, Ninth Circuit opinion, August 28, 2026

Nelson quoted Shakespeare on roses and added that placing sports bets, even when called by another name, is still gambling. The broadest reading of the swap definition in 7 U.S.C. § 1a(47)(A)(ii), he wrote, might cover these contracts, but that reading has no limiting principle, clashes with the rest of the statute, and would raise major-questions problems. Congress, the panel said, has spoken about gambling in other laws and did not wipe those laws out when it expanded swaps oversight in the Dodd-Frank Act.

Lee joined the result and wrote separately that the more natural reading of “event” would not include a typical ballgame. “Few people would describe, say, the New York Mets’ latest loss of a game as an ‘event,’” he wrote, and a single game in a 162-game season is a stretch as a financial or commercial consequence of the kind a swap is built around. He left room for some unusual sports events to fit the statute later. He did not need to decide that now, he said, because a CFTC rule already bars gaming contracts.

Why Casinos Lined Up Behind Nevada

The caption tells you who had money on this outcome. The Nevada Resort Association, the casino trade group, intervened as a defendant-appellee. Tribal gaming organizations, including the Indian Gaming Association and more than 20 federally recognized tribes, filed a brief defending state and tribal control of sports gambling. Nevada wrote the American casino rulebook and still taxes and licenses the sportsbooks that operate in its parlors. A CFTC badge was never going to pass as a hall pass on the Strip.

Gov. Joe Lombardo, a Republican, said prediction markets offering sports-event contracts constitute gambling and must follow Nevada’s gaming laws. Mike Dreitzer, chair of the Gaming Control Board, said in the Nevada board’s statement on the ruling that the decision “completely vindicates what we have been saying all along” and that “this is sports betting and needs to be properly regulated by the state.” The board has said the Ninth Circuit emphatically rejected the claim that the Commodity Exchange Act blocks Nevada’s rules as applied to sports-event contracts offered by Kalshi, Crypto.com, and Robinhood.

WHAT NEVADA ALREADY EXTRACTED

• The penalty: A July 24 deal lets the board charge $120,000 a day if Kalshi misses a geofence deadline the company had to meet by August 12.
• The admission: In that filing, Kalshi acknowledged that board investigators had still been able to enter sports, election, and entertainment contracts from inside Nevada after a state-court order told it to stop.
• The sportsbooks: DraftKings and FanDuel, which do not run their flagship online books in Nevada, dropped their Nevada licensing track and have stood up their own CFTC-regulated prediction apps in states where they lack a sportsbook license.
• The volume Kalshi showed the court: Company figures cited in the litigation put Kalshi over $1 billion in wagers on Super Bowl Sunday, over 27 times its 2025 Super Bowl total, and at more than 3 million app downloads in January 2026, more than DraftKings and FanDuel combined that month.

Those download and Super Bowl numbers are why the casinos showed up. Sports, not weather or elections, is the product that pulled Kalshi into the same customers licensed books already tax and geofence. FanDuel and DraftKings copying the federal-exchange route outside Nevada makes the fight stranger: the incumbents want the loophole closed at home and open in states where they have no sportsbook license.

Rule 40.11 Still Bans Gaming Contracts

The panel’s second pillar was not Nevada law. It was a federal regulation the CFTC wrote after Dodd-Frank and has not yet replaced. Designated contract markets may self-certify a new contract and list it the next business day, with the CFTC free to review later. Nelson’s opinion says Kalshi’s self-certification and listing of these sports contracts is unlawful under the Special Rule in the Commodity Exchange Act and under 17 C.F.R. § 40.11. The Third Circuit, the Ninth Circuit wrote, essentially disregarded that prohibition when it noted that the CFTC had not yet stepped in to kill any sports-related event contract.

WHAT RULE 40.11 BARS

• The ban: The CFTC rule that bars gaming contracts 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 activity that is unlawful under state or federal law.
• The review: The commission may put a suspect contract on a 90-day review and ask the exchange to suspend listing while that clock runs.
• The rewrite: A June proposal to rewrite that ban would still call sports outcome contracts “gaming,” then allow most of the game-winner and championship markets that now trade, while targeting a short list of injury, officiating, discrete-action, altercation, and pre-college contracts.

Lee’s concurrence is blunt about the sequencing. U.S. law, he wrote, does not seem to bar all gaming contracts as a statutory matter, and the CFTC has proposed revising § 40.11. “While CFTC has proposed revising that regulation, it remains in the books and controls the outcome of this appeal,” he wrote. Forty-four state attorneys general told the agency in a July 27 letter that the proposal’s definition of gaming would permit sports betting and other gambling contracts on these exchanges. The panel said the existing regulation controls for now. If the rewrite is adopted, the permission question can reopen. The coverage question, whether a sports bet is a swap at all, now sits with the courts in the Ninth Circuit.

New Jersey’s Thursday Deadline Heads to the Justices

On September 1, Kalshi CEO Tarek Mansour gave his first public comments on the Nevada loss and said the decision adds “legal uncertainty,” opens more questions, and makes things “more dynamic.” Lever had already said the firm would seek further review. New Jersey’s lawyers, who lost the April round, have said they intend to file a petition for a writ of certiorari, and their deadline is Thursday. In June they told Justice Samuel Alito they wanted more time in part because they were waiting to see whether another circuit would split. They have that split.

THE ROAD TO TWO MAPS

1. March 4, 2025: The Nevada Gaming Control Board sends Kalshi a cease-and-desist over unlicensed sports and election contracts.
2. November 2025: Judge Gordon dissolves the federal injunction that had blocked Nevada, after first granting Kalshi that freeze in the spring.
3. April 6, 2026: The Third Circuit, 2-1, keeps New Jersey from enforcing its gaming laws against Kalshi’s sports contracts.
4. April 16, 2026: The Ninth Circuit hears argument in San Francisco.
5. July 24, 2026: Kalshi and the board file a deal to stop the sports, election, and entertainment product in Nevada, with a $120,000 daily penalty if geofencing slips.
6. August 28, 2026: The Ninth Circuit affirms on sports contracts and sends election contracts back to the Las Vegas district court.
7. September 3, 2026: New Jersey’s deadline to petition the Supreme Court in the Third Circuit case.

Election contracts, which the panel called a fraction of Kalshi’s business, still have to be measured against the same swap definition in Gordon’s court. Sports, entertainment, and elections trading are already blocked in Nevada, Kalshi has said. The CFTC appeared as amicus in the Ninth Circuit case and has been suing states that try to regulate or ban the markets. A final Supreme Court grant would collapse the two maps into one. Until then, the West can treat a Kalshi sports contract as a bet, the mid-Atlantic can treat it as a swap, and Thursday is when New Jersey asks the justices to pick.

Disclaimer: This article is news reporting and analysis of court rulings and agency rules. It is for information only and is not legal advice, tax advice, or a recommendation to trade event contracts, place sports bets, or buy or sell any company’s shares. Readers who need to act on a specific contract, license, or dispute should consult a licensed attorney in the relevant state, and anyone considering a wager or a trade should consult a qualified financial or gambling-compliance professional. Figures, docket statuses, and agency proposals reflect the public record as of September 2, 2026, and can change with a new filing, a CFTC vote, or a Supreme Court order.