The U.S. Court of Appeals for the Ninth Circuit issued a 3‑0 decision that bars Kalshi, a regulated prediction‑market platform, from blocking Nevada’s effort to treat its sports‑related contracts as gambling. The ruling affirms that states retain the power to regulate such contracts, despite the Commodity Futures Trading Commission’s (CFTC) assertion of exclusive federal jurisdiction. Legal analysts say the split with the Third Circuit could soon compel the Supreme Court to settle the jurisdictional dispute.
Legal background and the appeal
Kalshi, which offers binary contracts on outcomes ranging from economic indicators to sports events, has operated under a CFTC licence that classifies its products as “event contracts.” The CFTC has long argued that these contracts fall under the definition of swaps, a category reserved for federal oversight. Nevada sued Kalshi in 2024, claiming the contracts are de facto sports bets and therefore subject to state gambling law. A district court ruled in Nevada’s favour, a decision Kalshi appealed on the basis that the CFTC’s jurisdiction pre‑empted state regulation.
“States have the authority to regulate prediction markets as gambling, and the CFTC’s jurisdiction does not pre‑empt state law,” the court said, as reported by The New York Times.
The Ninth Circuit agreed, finding that Kalshi had not demonstrated that federal law wholly supplanted Nevada’s authority. The judges held that the contracts at issue are “likely not swaps” and therefore do not fall within the CFTC’s exclusive domain, echoing the reasoning of the Block and Reuters reports.
Implications for prediction markets and crypto derivatives
The decision reverberates beyond sports betting. Kalshi’s platform is also a testing ground for crypto‑related products, such as the bitcoin index options that the Chicago Mercantile Exchange (CME) has opposed, according to VitalLaw.com. If states can label these instruments as gambling, they may face additional licensing hurdles, potentially stalling the rollout of novel crypto‑derivative contracts that have been touted as a bridge between traditional finance and digital assets.
Other jurisdictions are watching closely. The Arizona Mirror noted that the ruling could revive criminal prosecutions in Arizona, while WNKY reported that Kentucky has already filed a lawsuit against Kalshi for offering sports‑prediction contracts. The consensus among the outlets is that the judgment expands the regulatory toolkit available to states, allowing them to treat prediction‑market platforms similarly to conventional gambling operators.
Potential Supreme Court fight and industry reaction
Legal scholars point out that the Ninth Circuit’s stance conflicts with a Third Circuit decision that upheld the CFTC’s exclusive jurisdiction over similar contracts. This circuit split, highlighted by CNBC and CBS News, makes a Supreme Court review increasingly likely. Industry groups, including the Crypto Markets Association, have warned that prolonged uncertainty could hamper investment and innovation in the emerging prediction‑market sector.
Kalshi’s shares fell sharply after the ruling, and the company announced it will appeal to the Supreme Court, seeking a definitive answer on the interplay between federal commodity law and state gambling statutes. Observers say the outcome will shape not only the future of prediction markets but also the broader regulatory landscape for crypto‑linked financial products.
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Live data: CoinGecko — 2026-08-29 05:20 UTC
