Ninth Circuit Lets Nevada Enforce Gambling Laws Against Kalshi Sports Contracts

META_DESCRIPTION: Ninth Circuit let Nevada enforce gambling laws against Kalshi sports contracts, splitting with an April Third Circuit ruling.
TAGS: Kalshi, Nevada Gaming Control Board, CFTC, Ninth Circuit, Third Circuit, Sports Betting
MARKET_PLATFORM: Kalshi
CATEGORY: Regulation

A Ninth Circuit panel ruled on August 28 that Nevada may enforce its gambling laws against Kalshi’s sports event contracts while the case continues, giving state gaming regulators a major win and deepening a conflict with an April Third Circuit ruling that favored Kalshi in New Jersey.

The opinion, written by Judge Ryan D. Nelson and joined by Judge Bridget S. Bade, affirmed U.S. District Judge Andrew Gordon’s order dissolving an injunction as to sports event contracts. Judge Kenneth K. Lee concurred. The panel sent Nevada’s challenge to Kalshi’s election contracts back to the district court for further analysis.

What did the Ninth Circuit decide about Kalshi in Nevada?

The Ninth Circuit held that Kalshi had not shown it was likely to prove that the Commodity Exchange Act preempts Nevada’s gambling laws for sports event contracts. That means Nevada regulators can apply state gaming rules to Kalshi’s sports products while the litigation proceeds.

Nelson framed the dispute around Kalshi’s claim that sports contracts listed on a federally regulated designated contract market fall under the Commodity Futures Trading Commission’s exclusive jurisdiction. The panel rejected that reading at the preliminary-injunction stage. “Because we disagree with Kalshi’s overly broad reading of the CEA, and because CFTC regulations currently prohibit offering contracts related to gaming on prediction markets, we affirm the district court’s order dissolving the injunction as to sports event contracts,” Nelson wrote in the Ninth Circuit opinion.

Nevada’s gaming board sent Kalshi a cease-and-desist letter in 2025, telling the company that trading on sporting events and election outcomes was unlawful in the state. Kalshi sued in federal court and initially won an injunction preventing enforcement. Gordon later dissolved that injunction, and Kalshi appealed.

The Ninth Circuit’s ruling does not finally decide every claim in the case. It determines that Kalshi did not meet the standard needed to keep Nevada from enforcing its rules against sports event contracts during the litigation.

Why did the court reject Kalshi’s preemption argument?

Kalshi argued that it could not comply with Nevada gambling law and federal commodities law at the same time, and that Nevada’s rules obstructed the federal framework for designated contract markets. The Ninth Circuit disagreed, finding that the Commodity Exchange Act did not give Kalshi the broad shield from state gambling regulation that the company sought.

The panel treated sports event contracts as the central issue. Nevada said Kalshi was offering sports wagering without a state license. Kalshi said it was offering event contracts on a CFTC-regulated market. The Ninth Circuit concluded that, at least for purposes of the preliminary-injunction appeal, Nevada’s state-law authority over sports gambling was not displaced by the federal commodities statute.

Lee’s concurrence agreed with the result but focused on current CFTC regulations. He wrote that the court did not need to resolve every statutory question about whether some event contracts could qualify as swaps because 17 C.F.R. Section 40.11 currently bars gaming contracts.

How does this conflict with the Third Circuit’s Kalshi ruling?

The Ninth Circuit’s decision conflicts with the Third Circuit’s April 6 ruling in KalshiEX LLC v. Flaherty, No. 25-1922. In that case, the Third Circuit affirmed a preliminary injunction preventing New Jersey officials from enforcing state gambling laws against Kalshi’s sports-related event contracts.

The Third Circuit held that Kalshi had shown a reasonable likelihood of success on its argument that the Commodity Exchange Act preempts New Jersey’s enforcement effort. The Ninth Circuit reached the opposite practical result for Nevada’s enforcement action against sports contracts.

That split matters because prediction-market operators, state gaming regulators, sportsbook incumbents and the CFTC are fighting over the same basic question in multiple jurisdictions: whether federally regulated event-contract exchanges can offer sports markets without state gambling licenses. AP reported that roughly 20 states are involved in litigation over prediction markets run by companies including Kalshi, Polymarket and Robinhood.

CFTC spokesperson Zach Fulton said the Ninth Circuit “misread the statute” and described the decision as creating “a circuit split that calls out for resolution by the Supreme Court.” Kalshi said it would seek further review of the decision, according to AP.

What did Nevada and the gaming industry say?

Nevada officials cast the decision as a defense of state gaming authority. The Nevada attorney general’s office called the ruling a “major victory for Nevada and our longstanding authority to regulate gaming in our state,” according to AP. The office said sports betting does not become something else because a company labels it an event contract.

Nevada Governor Joe Lombardo said prediction markets offering sports-event contracts constitute gambling and must comply with Nevada’s gaming laws and regulatory framework, according to The Nevada Independent. That position tracks the state’s argument throughout the case: sports contracts offered to Nevada residents belong inside the state’s gaming regime unless Congress clearly says otherwise.

The American Gaming Association, which represents the commercial casino industry, also backed the outcome. CEO Bill Miller called the decision “a significant win for consumer protections and taxpayers” and “a big loss for Kalshi and other backdoor sports gambling operations,” according to The Nevada Independent. The AGA has opposed prediction-market entry into sports betting without state licensing.

What is the practical effect for Kalshi?

Kalshi cannot rely on the dissolved injunction to offer sports event contracts in Nevada while the ruling remains in effect. The company has said trading on sports, entertainment and election contracts is blocked in Nevada, AP reported.

The Ninth Circuit did not give Nevada a final ruling on election contracts. Instead, it remanded that part of the case because the district court had not analyzed whether Kalshi’s election contracts fit within the Commodity Exchange Act’s definition of a swap. The district court must now consider Nevada’s challenge to those contracts under the Ninth Circuit’s opinion.

The decision also changes the legal map for other prediction-market disputes. Kalshi has a favorable Third Circuit ruling against New Jersey and an adverse Ninth Circuit ruling against Nevada. State regulators challenging sports contracts now have a federal appellate decision supporting their position, while Kalshi and the CFTC can point to the Third Circuit’s contrary reading.

What comes next in the case?

The immediate next step is back in the U.S. District Court for the District of Nevada, where the election-contract issues return after the Ninth Circuit remand. The sports-contract portion of Gordon’s order remains affirmed at the appellate level unless further review changes it.

The case is KalshiEX LLC v. Assad, No. 25-7516, in the U.S. Court of Appeals for the Ninth Circuit. The related Third Circuit case is KalshiEX LLC v. Flaherty, No. 25-1922. As of the August 28 ruling, Kalshi had said it would seek further review, and the district court still had to address Nevada’s election-contract challenge.