A unanimous Ninth Circuit panel on August 28, 2026 let Nevada gaming regulators enforce state law against Kalshi’s sports event contracts, holding that Kalshi had not shown it was likely to prove federal commodities law preempts Nevada’s gaming regime. The ruling in KalshiEX LLC v. Assad, No. 25-7516, creates a direct conflict with the Third Circuit’s April 2026 ruling in Kalshi’s New Jersey case.
The Ninth Circuit did not enter a final judgment on the merits of every sports event contract, but it affirmed in part a Nevada federal court order dissolving preliminary injunction relief that had shielded Kalshi from Nevada Gaming Control Board enforcement. The panel remanded only for further proceedings on election contracts, leaving the sports-contract ruling as the central holding for the prediction-market industry.
What did the Ninth Circuit decide in the Nevada case?
The Ninth Circuit held that Kalshi had not shown a likelihood that the Commodity Exchange Act preempts Nevada gaming laws as applied to sports event contracts listed on Kalshi’s designated contract market. Judge Ryan D. Nelson, joined by Judges Bridget S. Bade and Kenneth K. Lee, wrote the opinion. Judge Lee also filed a concurrence.
The panel framed the appeal as a preliminary-injunction dispute, not a final merits ruling after trial. That distinction matters, but the legal analysis was unusually pointed for an interim posture. The court said Kalshi’s sports event contracts were likely not swaps under the Commodity Exchange Act because they were sports bets, and it also relied on CFTC Regulation 40.11, which bars certain contracts involving gaming from being listed on a designated contract market.
The opinion used Kalshi’s own product framing against it. The panel noted that Kalshi had described and marketed the contracts as legal sports betting, then rejected the company’s attempt to separate those contracts from state-regulated sports wagering. The court wrote: “The substance of the sports event contracts offered on Kalshi’s DCM is sports gambling, regardless of whether Kalshi calls them swaps.”
The Ninth Circuit also cited Nevada’s March 2025 cease-and-desist letter, which said Kalshi was operating as an unlicensed sports pool in violation of Nevada law. The opinion identified the relevant Nevada statutes as including Nev. Rev. Stat. §§ 463.160 and 463.245, provisions that govern unlicensed gaming activity and sports pools.
How does this conflict with the Third Circuit?
The Ninth Circuit’s ruling points the opposite way from the Third Circuit’s April 6, 2026 decision in KalshiEX LLC v. Flaherty, No. 25-1922. In that case, the Third Circuit affirmed preliminary relief blocking New Jersey from enforcing state gambling laws against Kalshi’s sports-related event contracts while the litigation proceeds.
The Third Circuit held that Kalshi had shown a reasonable chance of success on its argument that the Commodity Exchange Act preempts otherwise applicable state law. The Ninth Circuit rejected that approach, saying the Third Circuit’s field-preemption holding depended on treating Kalshi’s sports-related event contracts as swaps under the CEA. The Ninth Circuit expressly disagreed on that threshold point.
The result is a clean appellate split over the same commercial structure: sports-linked contracts offered by a CFTC-regulated designated contract market, challenged by state gaming regulators. In the Third Circuit, Kalshi has preliminary protection against New Jersey enforcement. In the Ninth Circuit, Nevada may proceed against Kalshi’s sports contracts under state gaming law.
The Ninth Circuit covers Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington. The Third Circuit covers New Jersey, Pennsylvania, Delaware and the Virgin Islands. For prediction-market operators, the disagreement creates different near-term legal conditions across major regions unless the Supreme Court or later merits rulings impose a uniform rule.
What is before the Supreme Court?
New Jersey has already moved the issue toward the U.S. Supreme Court. The Court’s docket in No. 25A1465 shows that Justice Samuel Alito extended New Jersey’s deadline to file a certiorari petition to September 3, 2026, and linked that application to No. 26-299, Mary Jo Flaherty, Interim Director, New Jersey Division of Gaming Enforcement, et al. v. KalshiEX, LLC.
That petition gives the justices a vehicle to review the Third Circuit’s ruling in favor of Kalshi. The Ninth Circuit’s later decision strengthens the case for Supreme Court attention because two federal appeals courts have now reached different conclusions in closely related disputes over sports event contracts and state gambling enforcement.
The Supreme Court is not required to take the case. If it denies review, the split could continue while the Nevada and New Jersey cases proceed in the lower courts. If it grants review, the question would likely become whether the Commodity Exchange Act and CFTC oversight leave room for states to apply gambling laws to sports event contracts listed on federally regulated exchanges.
Why did the ruling matter to sportsbook stocks?
Public sportsbook stocks moved higher after the Ninth Circuit decision. Investing.com reported on August 28 that DraftKings rose 6.5% and Flutter Entertainment gained 4.6% after the court ruling involving Kalshi. Flutter is the parent company of FanDuel.
Other market-news reports described larger intraday moves, with Stocktwits, republished by Yahoo Finance, saying DraftKings rose nearly 10% and Flutter jumped 8%. The more conservative Investing.com figures still show that public-market traders treated the ruling as material for the sports-betting sector.
The reason is structural. DraftKings, FanDuel and other sportsbook operators generally operate under state-by-state licensing systems, including state gaming rules, taxes and consumer-protection requirements. Kalshi’s position would allow sports-linked event contracts to operate through a federal commodities framework rather than through each state’s sports-wagering regime.
If state regulators can enforce gaming laws against those contracts, licensed sportsbooks retain a legal moat in states where prediction-market sports products would otherwise compete. If Kalshi ultimately prevails on federal preemption, event-contract platforms could offer sports-linked products nationally under a different regulatory model, subject to CFTC oversight rather than state gaming approval.
What did the Ninth Circuit say about the CFTC’s role?
The Ninth Circuit acknowledged that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over swaps traded or executed on a designated contract market. The panel’s key move was to hold that Kalshi’s sports event contracts likely do not qualify as swaps under the CEA’s definition when read in statutory context.
The court also relied on 17 C.F.R. § 40.11, which it described as currently barring gaming-related contracts from being listed on a designated contract market. The panel said the CFTC had not invoked a 90-day review or issued an order approving Kalshi’s sports event contracts. In Judge Lee’s concurrence, he wrote that the Special Rule’s statutory text gave him some pause, but that the court did not need to resolve the broader statutory question because the existing regulation controlled.
That analysis narrows the immediate question for operators. The fight is not only whether sports contracts resemble wagers as a matter of consumer experience. It is also whether the CEA’s swap definition, the CFTC’s event-contract authority and the agency’s gaming-contract regulation combine to preempt state enforcement.
What happens next?
The next milestone is the Supreme Court docket in the New Jersey case, No. 26-299, alongside further proceedings in Nevada after the Ninth Circuit remand. The Nevada ruling lets state regulators proceed against Kalshi’s sports event contracts, while the New Jersey injunction remains the competing appellate benchmark unless the Supreme Court steps in.
For the prediction-market industry, the immediate consequence is a fragmented legal map. Kalshi has favorable preliminary relief in the Third Circuit and an adverse preliminary-relief ruling in the Ninth Circuit. Until the Supreme Court acts or the underlying cases reach final judgments, sports event contracts remain exposed to state-by-state enforcement fights at the boundary between federal commodities law and state gaming authority.
