3-0 Ninth Circuit Rules Kalshi Sports Bets Aren't Swaps, Deepening Circuit Split

The Ninth Circuit Court of Appeals delivered a unanimous ruling on August 28, 2026, rejecting Kalshi's argument that its sports event contracts qualify as swaps under the Commodity Exchange Act and therefore fall under exclusive Commodity Futures Trading Commission jurisdiction. A three-judge panel, composed entirely of Trump appointees, affirmed a lower court order allowing Nevada to enforce its gaming laws against Kalshi's sports-related event contracts. This decision marks a significant setback for prediction markets that have sought to use federal commodity law to preempt state gambling regulations. The court's ruling turns on the statutory definition of a swap. Kalshi had contended that because its sports event contracts are listed on a CFTC-designated contract market, they should be regulated solely by the CFTC. The Ninth Circuit disagreed, finding that sports wagers do not meet the legal definition of a swap and that states like Nevada retain authority to police gambling activity within their borders. Judge Ryan Nelson's opinion highlighted Kalshi's own marketing language, noting the company advertises itself as 'the first app for legal sports betting in all 50 states.' That characterization, combined with the ballooning volume of activity on Kalshi's sports betting platform, undercut the company's claim that it was not really operating a sports betting product. The Nevada Gaming Control Board had sent a cease-and-desist letter to Kalshi, prompting the company to seek injunctive relief. The Ninth Circuit's decision now allows that enforcement action to proceed. The ruling carries broad implications beyond Kalshi. The Nevada Gaming Control Board stated that the Ninth Circuit emphatically rejected the view that the Commodity Exchange Act preempts application of Nevada's gaming laws to sports-event contracts offered by Kalshi, Crypto.com, and Robinhood. Nevada Governor Joe Lombardo, a Republican, reinforced this position, declaring that prediction markets offering sports-event contracts constitute gambling and must comply with Nevada's gaming laws and regulatory framework. This means three prominent platforms offering sports event contracts now face potential state enforcement actions in Nevada, one of the most important gaming jurisdictions in the United States. The decision also deepens a circuit split. The Ninth Circuit's ruling conflicts with a Third Circuit decision in a case involving New Jersey, which had found that sports wagers on prediction markets are swaps subject to CFTC jurisdiction. That split significantly increases the likelihood that the Supreme Court will take up the central question of whether prediction market sports contracts are swaps under federal law. The CFTC has been actively suing states that try to regulate or ban prediction markets, asserting that it alone has jurisdiction over them. The Ninth Circuit's decision undermines that federal agency position and creates an uneven regulatory landscape in which the legality of sports event contracts depends on geography and which federal appellate circuit has jurisdiction. For prediction market operators, the ruling introduces heightened legal uncertainty. Companies like Kalshi, Crypto.com, and Robinhood may face a patchwork of state enforcement actions, even as the CFTC maintains its stance that state regulation is preempted. The Supreme Court's potential intervention could resolve the conflict, but until then, operations in Nevada and potentially other states with strict gaming laws remain legally vulnerable. The ruling also invites state gaming regulators to be more aggressive in asserting authority over novel financialized products that resemble gambling. The forward-looking impact includes possible injunctions against sports event contract offerings, increased compliance costs, and potential shifts in product design as platforms seek to avoid triggering state gambling statutes. For investors and market participants, the regulatory risk profile of event contracts has increased, and the ultimate resolution may reshape the boundaries between commodity derivatives and state-regulated gambling. The decision demonstrates that courts are willing to look past labels and assess the economic substance of a product, a principle that could extend to other prediction market categories beyond sports. If the Supreme Court grants certiorari, the case could become a landmark ruling on the scope of CFTC exclusive jurisdiction and the interplay between federal commodity law and state police powers in the gambling context. Until then, the practical effect is that Nevada can move forward with enforcement, and prediction market platforms must reconsider their multistate sports betting claims.