A unanimous Ninth Circuit panel ruled on August 28 that Nevada may enforce its gaming laws against Kalshi’s sports event contracts, rejecting Kalshi’s argument that the Commodity Exchange Act blocks state oversight. The decision in KalshiEX LLC v. Assad conflicts with the Third Circuit’s April ruling in Kalshi’s New Jersey case and moves the federal-state fight over prediction markets closer to Supreme Court review.
What did the Ninth Circuit decide about Kalshi and Nevada?
The Ninth Circuit affirmed in part a Nevada federal court order dissolving Kalshi’s preliminary injunction against the Nevada Gaming Control Board, the Nevada Gaming Commission and related state officials. Writing for the panel, Judge Ryan D. Nelson said Kalshi had not shown that the Commodity Exchange Act likely preempts Nevada gaming regulation as applied to Kalshi’s sports event contracts.
The panel’s central conclusion was direct: “The substance of the sports event contracts offered on Kalshi’s DCM is sports gambling.” The court held that the contracts were not protected from Nevada law simply because Kalshi is a designated contract market regulated by the Commodity Futures Trading Commission.
The ruling does not resolve every Nevada issue. The Ninth Circuit remanded for the district court to consider Nevada’s challenges to Kalshi’s election contracts, while affirming the dissolution of the injunction as to sports-related contracts. That leaves the sports-contract dispute in Nevada tilted toward state enforcement, while election-contract questions remain for further proceedings.
Why did the court reject Kalshi’s preemption argument?
Kalshi’s core argument was that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over transactions on designated contract markets, leaving states no authority to apply gambling laws to contracts listed on a federally regulated exchange. The Ninth Circuit read that exclusivity more narrowly.
The panel said the CEA expressly preempts state regulation of swaps traded or executed on a designated contract market, but concluded Kalshi’s sports event contracts were sports bets rather than swaps under the statute’s best reading. The court also rejected Kalshi’s conflict-preemption and field-preemption arguments, saying Kalshi had not shown that complying with Nevada law would put it in violation of federal law or jeopardize its DCM status.
The Ninth Circuit also pointed to CFTC Regulation 40.11, which bars certain event contracts that involve, relate to or reference gaming. Judge Kenneth K. Lee, concurring, wrote that the CEA’s special rule gave him some pause because it uses discretionary language, but said that question did not need to be resolved at this stage because the current CFTC regulation bars gaming contracts.
How does this split with the Third Circuit?
The Third Circuit reached the opposite result on April 6 in KalshiEX LLC v. Flaherty, a New Jersey case involving similar preemption questions. There, the appeals court affirmed a preliminary injunction that prevented New Jersey officials from enforcing state gambling laws against Kalshi’s federally listed event contracts.
The split is now explicit: the Third Circuit held that Kalshi was likely to succeed on its claim that the CEA preempts New Jersey’s enforcement effort, while the Ninth Circuit held that Kalshi was not likely to succeed on the same kind of claim against Nevada’s enforcement effort. The Ninth Circuit acknowledged the Third Circuit decision but declined to follow its broader reading of CFTC exclusivity.
That conflict gives the Supreme Court a cleaner vehicle to decide how far federal commodities law reaches when prediction-market contracts overlap with sports betting, gaming or election wagering. A circuit split does not guarantee Supreme Court review, but it is one of the clearest signals that a federal legal question has outgrown a single regional dispute.
What is New Jersey’s Supreme Court deadline?
New Jersey is already positioned to ask the Supreme Court to review the Third Circuit decision. The next concrete milestone is the state’s certiorari deadline, which runs to September 3, 2026, under the Supreme Court extension schedule in the Flaherty matter.
If New Jersey files, the justices would have before them the Third Circuit ruling that favored Kalshi and, now, the Ninth Circuit ruling that favored Nevada. Kalshi may also seek further review of the Ninth Circuit decision. A Supreme Court case could determine whether federally regulated prediction markets can offer sports contracts nationwide without obtaining state gaming licenses, or whether states can treat those contracts as gambling when offered to their residents.
What is happening in New York?
New York has chosen a state-court enforcement path. On July 31, Governor Kathy Hochul and Attorney General Letitia James announced that New York had sued Kalshi in New York Supreme Court in Manhattan, alleging that the company operates an illegal, unlicensed gambling business in the state.
The New York Attorney General’s Office said the lawsuit seeks an order stopping Kalshi from operating as an unlicensed gambling business, along with forfeiture of illegal gains, restitution to users and fines equal to three times the gains Kalshi made through the challenged conduct. The office has described the possible penalty exposure as reaching as much as $36 billion.
Kalshi has also been fighting New York in federal court. U.S. District Judge Analisa Torres issued an opinion on July 7 denying Kalshi’s bid for a preliminary injunction against New York regulators, with a corrected order dated July 13. Kalshi appealed to the Second Circuit. On July 29, Judge Myrna Pérez denied temporary administrative relief and referred Kalshi’s injunction-pending-appeal motion to a three-judge panel, leaving the broader appellate request for the panel to decide.
What did the Minnesota order actually say?
Minnesota enacted one of the most aggressive state laws aimed at prediction markets. The CFTC said in a May 19 release that it sued Minnesota to block a law signed by Governor Tim Walz that would make operating or assisting in the operation of a prediction market a criminal felony, with enforcement scheduled to begin August 1.
On July 27, U.S. District Judge Katherine Menendez granted preliminary relief blocking enforcement while the litigation proceeds. The order found that Kalshi and Polymarket US had shown irreparable harm, including business disruption and compliance burdens, if the law took effect. Kalshi’s filings cited more than 90,000 verified Minnesota users and millions of dollars in open positions tied to Minnesota users, but the court’s irreparable-harm finding ran to the plaintiff companies, not to a separate class of users.
The Minnesota case matters because the CFTC itself is the plaintiff. That puts the federal regulator directly opposite a state government, rather than appearing only as an amicus or background regulator in a private company’s preemption lawsuit.
How broad is the state-level fight?
The state response is no longer limited to cease-and-desist letters. The National Conference of State Legislatures said in a July 22 update that at least 15 states had addressed prediction-market legislation in the 2026 legislative year. Those measures vary widely: some propose bans or licensing regimes, while others address taxes, studies, youth access, candidate wagering or specific categories such as death, catastrophe and political markets.
Six states enacted prediction-market-related laws in 2026, according to NCSL. Connecticut mandated a study of prediction-market platforms. Kentucky imposed an excise tax on prediction-market operator transaction fees and separately restricted racetrack participation with event-contract platforms. Minnesota prohibited prediction-market-related activity and added a petty-misdemeanor provision for candidates wagering on elections in which they are running. North Carolina imposed a tax on net trading-fee revenue. Tennessee created a felony offense for conduct intended to influence an event outcome while benefiting from a prediction-market contract.
The CFTC has taken the opposite posture in several lawsuits. In its Minnesota release, the agency said it had also filed actions against Connecticut, Illinois and New York, and had filed amicus briefs in the Ninth Circuit, the Sixth Circuit and the Massachusetts Supreme Judicial Court. The agency’s position is that state laws aimed at CFTC-regulated event contracts threaten the federal market structure Congress created under the CEA.
What happens next?
The immediate legal calendar now runs through three venues: the Supreme Court, the Second Circuit and the Nevada district court. New Jersey’s September 3 Supreme Court deadline is the next dated milestone. The Second Circuit still has Kalshi’s New York appeal before it, including the referred request for an injunction pending appeal. In Nevada, the district court must address the election-contract issues that the Ninth Circuit sent back.
The broader stakes are straightforward. If the Third Circuit’s reading prevails, CFTC-regulated exchanges gain a stronger path to list event contracts despite state gambling objections. If the Ninth Circuit’s reading prevails, states retain more power to force sports-related prediction contracts into gaming-law systems built for sportsbooks. The Supreme Court filing deadline on September 3 is the next point at which that conflict can move from regional appellate courts to the national docket.
