A federal appeals court has handed state gaming regulators a significant victory in their jurisdictional battle with the Commodity Futures Trading Commission, ruling that Nevada may subject Kalshi’s sports-event contracts to its gambling laws.
The unanimous Ninth U.S. Circuit Court of Appeals decision deepens a conflict among federal courts over whether sports-related prediction contracts are financial derivatives regulated exclusively by the CFTC or conventional sports wagers subject to state oversight.
Most significantly, the ruling conflicts directly with an April decision by the Third Circuit, which held that New Jersey could not regulate Kalshi’s sports contracts. The resulting circuit split creates increasingly favorable conditions for the Supreme Court to resolve a dispute with major implications for prediction markets and the traditional authority of states to regulate gambling.
“This is a classic circuit split,” Columbia Law School professor Joshua Mitts told CNBC. “Ultimately, this is the kind of legal controversy or legal difference of opinion which will make its way to the Supreme Court.”
The Ninth Circuit upheld a Nevada federal judge’s November 2025 decision dissolving an injunction that had allowed Kalshi to continue offering sports contracts in the state without a gaming license. Related requests for injunctive relief from Crypto.com and Robinhood were also rejected.
Kalshi operates a CFTC-regulated designated contract market offering contracts tied to the outcomes of elections, economic indicators, weather, entertainment and sporting events. It argues that its event contracts qualify as “swaps” under the Commodity Exchange Act, giving the CFTC exclusive jurisdiction and preempting state gaming laws.
The CFTC has embraced that position and challenged regulatory actions in nine states. It maintains that a contract structured as a derivative remains a swap regardless of its underlying subject.
“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,” a CFTC spokesperson told CNBC. The agency accused the Ninth Circuit of creating “a new and atextual exception” to the Commodity Exchange Act.
The Ninth Circuit disagreed. Writing for the court, Judge Ryan Nelson said Kalshi’s contracts possessed the defining characteristics of sports bets, which he called “a quintessential form of gambling.” Kalshi had even marketed itself as “the first app for legal sports betting” nationwide.
“Calling a sports bet a ‘swap’ doesn’t make it one,” the court concluded.
Nelson reasoned that Congress was unlikely to have displaced states’ longstanding gambling authority through broad language added to financial-reform legislation. The CFTC, he wrote, “is not a national gambling regulator,” and no one had suggested that it was until more than a decade after the relevant law was enacted.
That reasoning diverges from the Third Circuit’s conclusion that Kalshi’s sports contracts fall within the statutory definition of swaps and therefore within the CFTC’s exclusive domain. Both courts recognize that federal law preempts state regulation of actual swaps traded on CFTC-designated markets. Their disagreement concerns the crucial threshold issue: whether a sports-outcome contract is a swap in the first place.
Kalshi litigation chief Jovy Dedaj said the Ninth Circuit improperly decided that question itself. In a post on X he argued that Congress assigned the CFTC responsibility for determining whether event contracts involving gaming are contrary to the public interest.
Nevada viewed the ruling as confirmation of its traditional police powers. “Sports betting does not become something else simply because a company calls it an ‘event contract,’” the state attorney general’s office said in a statement.
The decision does not fully resolve Nevada’s case. The Ninth Circuit returned the dispute to the district court to consider Kalshi’s election contracts, which are also prohibited under Nevada law but represent a smaller portion of its business.
Robinhood said it plans to appeal. Meanwhile, the contradictory appellate rulings leave prediction market operators facing different legal regimes across the country unless Congress, the CFTC or the Supreme Court supplies a national answer.
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