Ninth Circuit deals blow to Kalshi in Nevada sports betting fight, challenging CFTC's exclusive jurisdiction claim

An appeals court sided with a lower court's ruling that prediction markets platform Kalshi failed to show that the federal government preempts Nevada’s authority to regulate sports betting.

On Friday, the U.S. Court of Appeals for the Ninth Circuit said in its opinion that Kalshi does not get to have an injunction after the Nevada Gaming Control Board sent the company in 2025 a cease-and-desist letter demanding that it stop its election and sports event contracts in the state, threatening criminal or civil charges.

Kalshi then sued the gaming board and the state and asked for a preliminary injunction to prevent Nevada from regulating its trading of sports and election event contracts. The district court initially granted that injunction, but later dissolved it after a ruling made against Crypto.com.

"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 appeals court said on Friday.

Three of the appeals judges also addressed whether the federal government, i.e., the Commodity Futures Trading Commission under the Commodity Exchange Act, or state regulators in Nevada have jurisdiction over sports betting.

"The panel concluded that the CEA  likely does not preempt Nevada’s gaming regulations as applied to Kalshi’s sports event contracts," the panel of judges said.

States v. CFTC

State officials across the country have increasingly raised concerns about prediction markets, an industry now valued at billions of dollars. Much of the concern has centered on platforms offering sports-related contracts, which states argue can amount to gambling and violate their gaming laws.

The dispute has put state regulators at odds with the CFTC, which oversees derivatives markets under the Commodity Exchange Act.  CFTC Chair Michael Selig has said the agency has "exclusive jurisdiction" over prediction markets, including sports-related contracts, and has sued several states as the federal government and state regulators clash over how the industry should be regulated. The CFTC has also put forth a proposed framework for regulating prediction markets.

In a statement, CFTC spokesperson Zach Fulton said the appeals court misread the statute and regulations, and said the case is "now teed up a circuit split that calls out for resolution by the Supreme Court."

"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 in an emailed statement to The Block. "The Ninth Circuit erred today when it invented a new and textual exception to the CEA."

A Kalshi spokesperson also pushed back on the ruling.

"Despite the Ninth Circuit’s opinion, we still believe the CFTC regulations as written do not prohibit sports contracts, and in any event, the CFTC is working to clarify those regulations," said spokesperson Dani Lever. "We will be seeking further review."