Ninth Circuit rules Kalshi sports bets aren't swaps, splitting 2 circuits

The Ninth Circuit ruled Friday that Kalshi's sports event contracts are sports betting, not swaps under federal commodity law, upholding a ruling that lets Nevada crack down on the prediction market's offerings.

"For Kalshi to deny that its sports event contracts are sports bets under a reasonable person's understanding is disingenuous," Judge Ryan D. Nelson wrote for the panel. "Everyone, including Kalshi, knows it when they see it."

The ruling creates a circuit split with the Third Circuit, which in April ruled 2-1 that Kalshi's sports contracts are swaps under the Commodity Exchange Act's exclusive federal jurisdiction. The panel also remanded Kalshi's election contracts to a lower court for further proceedings.

The split makes Supreme Court review increasingly likely. New Jersey is expected to file a petition for review by September 3, and the outcome could determine whether the roughly $50.6 billion in monthly global prediction market volume stays under Commodity Futures Trading Commission oversight or falls to state gaming regulators.

The Ninth Circuit panel said it disagreed with Kalshi's "overly broad reading" of federal commodity law. The decision lets Nevada gaming officials continue treating sports prediction markets as unlicensed sportsbooks, which the state has argued require a gaming license under its established regulatory framework.

The ruling is the second federal appellate opinion in the nationwide fight over regulatory control of the prediction market industry. The Third Circuit's April decision, which upheld a preliminary injunction against New Jersey gaming regulators, said Kalshi was likely to prevail on its argument that sports event contracts are swaps on CFTC-designated contract markets. Judge Jane Richards Roth dissented, arguing the contracts are indistinguishable from traditional sports betting.

A patchwork of state challenges

Kalshi is now in legal disputes with regulators in roughly 20 states, and the CFTC has sued at least nine states to defend what it calls its exclusive jurisdiction over event contracts. About 80 cases are filed in state and federal courts, with roughly 85 percent of decisions going against prediction markets, according to Joe Webster, a partner at Hobbs Strauss.

Minnesota became the first state to sign a law banning prediction markets on May 18, though a federal judge blocked it from taking effect. Connecticut sued Kalshi on Tuesday, arguing the products are "no different than sports betting" and violate the state's licensing and consumer-protection framework. Washington and Utah have also secured rulings allowing state-level crackdowns.

The stakes are substantial. Combined monthly global trading volume on prediction markets reached about $50.6 billion in July 2026, according to a Pew Research Center analysis, compared with roughly $14 billion per month wagered at legal U.S. sportsbooks in 2025.

If the Supreme Court takes up the case, the central question is whether Congress, when it amended the Commodity Exchange Act, intended to preempt two centuries of state and tribal gambling regulation. A ruling for the states would force Kalshi and rivals such as Polymarket to seek state gaming licenses or exit sports markets entirely; a ruling for the CFTC would cement federal oversight of a fast-growing derivatives segment.

The Ninth Circuit's decision also leaves Kalshi's election contracts in limbo, remanded for further proceedings. With New Jersey's petition expected by September 3 and appeals pending in the Second and Sixth Circuits, the legal situation for prediction markets is unlikely to stabilize before the high court weighs in.

This article is for informational purposes only and does not constitute investment advice.