Ninth Circuit Rules Kalshi Sports Bets Are Gambling, Not Swaps

⏱ 3 min read

On August 28, 2026, a three-judge panel of the Ninth U.S. Circuit Court of Appeals handed prediction-market platform Kalshi a significant legal defeat, ruling unanimously that the company's sports event contracts are likely sports bets — not federally regulated swaps — and that Nevada can enforce its gaming laws against them. The decision in KalshiEX, LLC v. Assad (Case No. 25-7516) immediately reinstates Nevada's ability to ban the platform from offering sports-related contracts in the state.

The ruling lands at a pivotal moment: roughly 20 states are currently in active litigation over prediction markets, and the 9th Circuit decision directly contradicts a Third Circuit ruling from April 2026 that sided with Kalshi. That circuit split now puts a U.S. Supreme Court showdown on the table — a case that could permanently define whether state gaming regulators or federal commodities law controls the fast-growing prediction market sector.

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What the Court Decided

The panel, with Judge Ryan Nelson authoring the opinion and Judge Kenneth Lee writing a concurrence, found that Kalshi's sports contracts — covering outcomes such as game winners, point spreads, player performance, and multi-leg combinations — do not qualify as swaps under the Commodity Exchange Act (CEA). The court's reasoning was blunt: calling a product an "event contract" and listing it on a CFTC-registered exchange does not strip a state of its authority to regulate gambling within its borders.

In the panel's words, as reported by the National Law Review: "The substance of the sports event contracts offered on Kalshi's DCM is sports gambling, regardless of whether Kalshi calls them swaps." The court also warned that accepting Kalshi's argument would create absurdly broad CFTC jurisdiction — extending federal oversight to bingo games and ping pong matches.

• Ruling: 3–0 in favor of Nevada
• Case: KalshiEX, LLC v. Assad, No. 25-7516
• Date: August 28, 2026
• Immediate effect: Nevada's enforcement ban on Kalshi sports contracts reinstated

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CFTC Preemption Rejected

Kalshi's central legal argument was that the Commodity Exchange Act preempts state gambling law because its platform operates under CFTC oversight as a designated contract market (DCM). The Ninth Circuit rejected this outright. The panel pointed to CFTC Rule 40.11, which itself prohibits gaming-related contracts on registered exchanges, as evidence that federal law does not — and never did — protect sports event contracts from state regulation.

The court found it could interpret whether Kalshi's products constitute gaming under the CEA without triggering a full Administrative Procedure Act review, narrowing Kalshi's procedural escape routes. Nevada Gaming Control Board Chairman Mike Dreitzer called the outcome definitive: "This completely vindicates what we have been saying all along. This is sports betting." American Gaming Association CEO Bill Miller described it as "a significant win for consumer protections and taxpayers."

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The Circuit Split Explained

The legal picture across the country is now fractured. The Third Circuit ruled 2–1 in April 2026 that New Jersey could not regulate Kalshi's platform, finding that federal law grants the CFTC exclusive jurisdiction over contracts listed on a designated contract market. The Ninth Circuit reached the opposite conclusion just four months later. Both courts interpreted the same statute — the Commodity Exchange Act — and arrived at contradictory answers.

Circuit	Ruling Date	Outcome for Kalshi	Core Finding	States Covered
Third Circuit	April 2026	Win (2–1)	CEA grants CFTC exclusive jurisdiction; states cannot regulate DCM-listed contracts	NJ, PA, DE, VI, PR
Ninth Circuit	Aug 28, 2026	Loss (3–0)	Sports event contracts are sports bets; CFTC Rule 40.11 bars gaming contracts; state law not preempted	NV, CA, AZ, OR, WA, HI, AK + 2 others

Both decisions arose from preliminary injunction proceedings, not final merits judgments. New Jersey had until September 3, 2026 to petition the Supreme Court. Kalshi spokeswoman Dani Lever confirmed the company "will be seeking further review," making a cert petition near-certain. The CFTC has also signaled potential intervention at the Supreme Court level, according to PYMNTS.

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Impact on Operators and Bettors

For the licensed US sports betting market, the ruling is a short-term win but leaves a longer-term question mark. If the Supreme Court ultimately sides with the Third Circuit and grants prediction markets federal protection, a new competitive layer — operating outside state gaming frameworks and without the same tax and licensing obligations — could emerge alongside traditional sportsbooks.

• Nevada bettors: Kalshi's sports contracts remain unavailable in-state until litigation concludes.
• Operators in the Ninth Circuit (California, Arizona, Oregon, Washington and others): The ruling signals those states may now enforce similar bans without injunction risk.
• Licensed sportsbooks nationwide: A Supreme Court ruling for Kalshi could introduce a federally shielded competitor bypassing state tax and licensing requirements.
• Prediction market users: Geographic access to sports contracts now depends entirely on which circuit a user resides in — a patchwork only SCOTUS can resolve.
• Regulators: The CFTC may clarify or revise Rule 40.11 before the Supreme Court acts, potentially reshaping the legal landscape regardless of judicial outcome.

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Sources

Reporting draws on primary court documents, regulator statements, and coverage from four independent outlets verified at time of publication.

The substance of the sports event contracts offered on Kalshi's DCM is sports gambling, regardless of whether Kalshi calls them swaps.

— Ninth Circuit Court of Appeals, KalshiEX, LLC v. Assad (No. 25-7516) · August 28, 2026