Meta description: Ninth Circuit let Nevada enforce gaming law against Kalshi sports contracts, deepening a circuit split over prediction markets.
Tags: Kalshi, CFTC, Nevada Gaming Control Board, DraftKings, Flutter Entertainment, Ninth Circuit
Market platform: Kalshi
Category: Regulation
A unanimous Ninth Circuit panel said August 28 that Kalshi is unlikely to prove Nevada’s gaming laws are preempted as applied to its sports event contracts. The ruling in KalshiEX LLC v. Assad, No. 25-7516, affirmed a district court order dissolving a preliminary injunction that had blocked the Nevada Gaming Control Board from enforcing state law against Kalshi’s sports markets.
The decision does not end the underlying case. It does, however, give Nevada a major appellate win in the central legal fight over whether federally regulated event-contract exchanges can offer sports contracts without state gaming licenses. It also sharpens the conflict with the Third Circuit, which reached the opposite result in April in Kalshi’s New Jersey litigation.
What did the Ninth Circuit decide about Kalshi’s Nevada injunction?
Judge Ryan D. Nelson, writing for a panel that also included Judges Bridget S. Bade and Kenneth K. Lee, held that Kalshi had not shown it was likely to succeed on its argument that the Commodity Exchange Act preempts Nevada’s sports-betting laws. The Ninth Circuit opinion said the district court properly dissolved the preliminary injunction that had protected Kalshi from Nevada enforcement.
The panel’s key holding was procedural but consequential. At the preliminary-injunction stage, the court did not issue a final merits judgment on every legal question. Instead, it evaluated Kalshi’s likelihood of success, the standard that determines whether emergency relief should remain in place while the case continues.
Nelson wrote that “the substance of the sports event contracts offered on Kalshi’s DCM is sports gambling, regardless of whether Kalshi calls them swaps.” The opinion also rejected Kalshi’s broad reading of federal preemption, stating that “Congress did not take a wrecking ball to all sports gambling regulations” when it gave the Commodity Futures Trading Commission authority over swaps under the post-crisis Wall Street reform framework.
The panel also pointed to CFTC Regulation 40.11, which restricts designated contract markets from listing certain event contracts involving gaming. In the Ninth Circuit’s formulation, Kalshi’s federal-status argument was weakened by the fact that CFTC rules themselves address gaming-related contracts rather than treating all event contracts as automatically insulated from state gambling law.
How does the ruling conflict with the Third Circuit?
The Ninth Circuit’s August 28 ruling conflicts with the Third Circuit’s April 6, 2026 decision in KalshiEX LLC v. Flaherty. In that case, a divided Third Circuit panel held that New Jersey could not enforce state gaming law against Kalshi’s federally regulated contracts because the Commodity Exchange Act preempted the state’s action against a CFTC-licensed designated contract market.
That leaves Kalshi with opposite appellate answers in two regions. In the Third Circuit, the company has favorable precedent from its New Jersey case. In the Ninth Circuit, Nevada has favorable precedent at the preliminary-injunction stage. The split increases the practical pressure for further appellate review, including possible en banc review in the Ninth Circuit or a petition to the Supreme Court.
Kalshi spokesperson Dani Lever told The Hill that the company would seek “further review.” That statement keeps the case on a path toward additional appellate proceedings, although the timing and forum depend on which route Kalshi chooses.
What did Nevada and gaming incumbents say?
Nevada officials framed the ruling as a state gaming-law win. Nevada Gaming Control Board Chairman Mike Dreitzer said after the decision: “This is sports betting and needs to be properly regulated by the state.” Gov. Joe Lombardo’s office said “prediction markets offering sports-event contracts constitute gambling.”
The American Gaming Association, the national trade group for licensed casino and sportsbook operators, supported Nevada’s position as an amicus in the litigation. Its involvement underscored the broader industry stakes: licensed sportsbooks want courts to reject the argument that CFTC designation alone lets prediction-market exchanges bypass state sports-betting regimes.
Those stakes reach beyond Kalshi. Crypto.com and Robinhood Derivatives have pursued related appeals over prediction-market sports contracts, including consolidated proceedings in the Ninth Circuit. Their posture matters because the same preemption question affects multiple federally regulated or federally connected event-contract businesses, not only Kalshi’s Nevada case.
Why did sportsbook stocks move after the decision?
DraftKings and Flutter Entertainment, the parent company of FanDuel, rose after the Ninth Circuit decision. Investing.com reported that DraftKings traded as high as $26.04, up 7.5% intraday, while Flutter gained about 4.6%. The same report noted a weaker broader market, with the S&P 500 down 0.3% and the Nasdaq down 0.5%.
The stock moves reflected investor attention to the competitive overlap between state-licensed sportsbooks and prediction-market platforms offering sports contracts. DraftKings, FanDuel, and other sportsbook operators generally operate under state licensing, taxation, geofencing, and responsible-gaming rules. Kalshi’s position in the litigation is that its status as a CFTC-regulated designated contract market gives it a federal path that state gaming regulators cannot block.
The Ninth Circuit decision strengthens the state-regulator side of that dispute in the western states covered by the circuit, including Nevada, California, Washington, Oregon, Arizona, Idaho, Montana, Alaska, and Hawaii. It does not create a nationwide rule. The Third Circuit’s New Jersey decision remains a competing appellate authority unless the Supreme Court or Congress resolves the conflict.
Is Kalshi still allowed to fight the Nevada case?
Yes. The Ninth Circuit affirmed the dissolution of a preliminary injunction, not a final judgment after trial. The underlying case before U.S. District Judge Andrew Gordon continues, and Kalshi can still press its preemption arguments as the litigation develops.
The practical effect is that Nevada is no longer blocked by that injunction from enforcing its gaming laws against Kalshi’s sports event contracts while the case proceeds. Nevada has also pursued compliance pressure against Kalshi in district court, including allegations tied to access by Nevada consumers, according to the Las Vegas Review-Journal.
The CFTC remains central to the dispute because Kalshi’s legal argument depends on the federal framework for designated contract markets and event contracts. The Ninth Circuit opinion specifically treated CFTC Regulation 40.11 as relevant to the analysis. Any future CFTC action on gaming-related event contracts could affect the litigation landscape, but the August 28 decision came from the court, not from a new agency rule.
How broad is the state fight over sports prediction markets?
The sports-contract fight is now spread across federal courts, state regulators, the CFTC, and the licensed gaming industry. Covers has tracked 19 states with pending litigation involving prediction-market regulation, while the Associated Press and CBS have described the broader dispute as involving roughly 20 states. Separately, 44 states signed a CFTC comment letter opposing sports-event contracts offered through prediction markets as unlicensed sports gambling.
The litigation is not uniform. Some cases focus on injunctions against state enforcement. Others involve cease-and-desist orders, geofencing disputes, or the status of specific event contracts. The common question is whether the Commodity Exchange Act leaves room for state gaming regulators when a federally regulated exchange lists sports-related contracts.
For Kalshi, the next concrete milestone is a choice of appellate route. The company can seek rehearing or rehearing en banc in the Ninth Circuit, or later ask the Supreme Court to take the preemption question. The Supreme Court path becomes more plausible when federal appeals courts split on the same legal issue, and the Third and Ninth Circuit decisions now give the industry two conflicting appellate frameworks for sports prediction markets.
