The U.S. Court of Appeals for the Ninth Circuit has dealt Kalshi a setback in its effort to keep Nevada’s gambling regulators away from its sports event contracts, ruling that the company had not shown it was likely to prove that federal commodities law overrides the state’s gaming rules.
In an opinion issued Friday, a three-judge panel upheld a lower court’s decision to dissolve an injunction that had temporarily stopped Nevada from enforcing its gaming framework against Kalshi’s sports-related offerings. The ruling leaves the company exposed to state-level enforcement while it pursues further review and deepens a legal clash over whether prediction-market contracts tied to sporting events should be treated as federally regulated derivatives or state-regulated wagers.
The Ninth Circuit concluded that the Commodity Exchange Act, or CEA, likely does not preempt Nevada gaming regulations as applied to the sports contracts in the case. Kalshi had argued that the Commodity Futures Trading Commission’s authority over derivatives markets prevented Nevada from applying its own laws.
“We conclude that Kalshi has not shown a likelihood that the CEA preempts state gaming regulations as applied to its sports event contracts and that the district court did not abuse its discretion by dissolving the injunction,” the court wrote.
Nevada’s cease-and-desist order triggered the case
The dispute began after the Nevada Gaming Control Board sent Kalshi a cease-and-desist letter in 2025. The board ordered the company to stop offering election and sports event contracts to users in Nevada and warned that continued activity could lead to civil or criminal action.
Kalshi sued the board and the state, seeking a preliminary injunction that would prevent Nevada from regulating its contracts while the underlying case continued. A district court initially granted that protection, allowing the platform to avoid immediate enforcement.
That arrangement changed after a separate ruling involving Crypto.com, which led the district court to reconsider its position and dissolve Kalshi’s injunction. The Ninth Circuit found no abuse of discretion in that decision, leaving Nevada free to apply its gaming laws to the company’s sports-related markets.
The appeals court’s decision concerns sports contracts specifically. Kalshi’s earlier challenge had also involved election contracts, but the Ninth Circuit’s conclusion focused on whether Nevada could regulate contracts tied to sports outcomes under its gambling rules.
Federal regulators dispute the court’s reading
The ruling puts the Ninth Circuit at odds with the Commodity Futures Trading Commission’s view of its legal authority. The CFTC oversees derivatives markets under the Commodity Exchange Act, and its chair, Michael Selig, has said the agency holds “exclusive jurisdiction” over prediction markets, including contracts connected to sports.
CFTC spokesperson Zach Fulton said the agency believes the Ninth Circuit misinterpreted both the statute and agency regulations. He said the case has created a circuit split that could ultimately require the U.S. Supreme Court to settle the issue.
“A derivative contract structured as a swap is a swap regardless of the underlying subject matter — the only exceptions in statute are onions and movie box office receipts,” Fulton said. “The Ninth Circuit erred today when it invented a new and textual exception to the CEA.”
Fulton’s argument rests on the structure of federal commodities law: if a contract falls within the statutory definition of a swap or other regulated derivative, the nature of the event being traded should not determine whether states may treat it as gambling. Nevada, by contrast, has maintained that contracts allowing users to take positions on sporting outcomes fall within the state’s established gaming regime.
The CFTC has also been advancing a proposed framework for prediction markets, a process that could shape how the agency treats event-based contracts. The Ninth Circuit ruling means that federal rulemaking may not resolve the immediate state-law disputes facing platforms that offer sports markets.
Kalshi plans to seek further review
Kalshi spokesperson Dani Lever said the company will pursue further review of the decision. Lever said Kalshi believes the CFTC’s regulations, as written, do not prohibit sports contracts and pointed to the agency’s work to clarify the rules.
The company’s next options could include asking the full Ninth Circuit to rehear the case or seeking Supreme Court review. Neither path would automatically restore the dissolved injunction, and Nevada could continue to enforce its rules unless a court grants fresh relief.
The case places prediction-market operators in a more fragmented legal environment. Companies may be federally registered and subject to CFTC oversight while also facing state gaming boards that view sports contracts as unlicensed betting products. That structure creates operational pressure for platforms to assess access state by state rather than rely on a single federal position.
For Nevada, the ruling preserves its ability to decide whether sports event contracts offered through online trading platforms meet the state’s definition of gambling. The state can now pursue enforcement without the injunction that had blocked it, though the broader lawsuit and any appeal may continue.
Sports contracts remain the central legal fault line
State officials across the United States have increasingly challenged prediction-market products that resemble sports betting. Their concern is centered less on the technology used to list contracts than on the consumer activity the contracts enable: users can buy positions based on the outcome of a game, team performance, or other sporting result.
Prediction-market companies argue that these products are financial contracts traded in regulated markets rather than traditional sportsbook wagers. The Ninth Circuit’s decision does not settle that question nationwide, but it gives Nevada’s interpretation substantial room within the court’s jurisdiction.
A Supreme Court case could produce a national answer if the justices agree to hear the dispute, particularly if other federal appeals courts reach a different conclusion. Until then, the decision gives state regulators a stronger basis to challenge sports contracts within their borders, while leaving platforms such as Kalshi to defend their federal-law arguments in multiple venues.
Curious how prediction markets work in practice? Explore Toobit’s event contracts and see how regulated trading platforms structure such markets.
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