Unanimous Appeals Court Ruling Deals Blow to Prediction Market and Deepens Nationwide Circuit Split, Opening Potential Path to Supreme Court
In a decisive 3-0 ruling, the Ninth Circuit Court of Appeals has upheld Nevada’s authority to regulate Kalshi’s sports event contracts as traditional forms of gambling. The decision rejects Kalshi’s appeal and its core argument that the platform’s financial event contracts qualify as “swaps” protected from state gaming oversight under the federal Commodity Exchange Act (CEA).
The Court’s Rationale: Substance Over Semantics
Writing for the panel, Judge Ryan Nelson dismissed the semantic distinction between prediction markets and sports betting, emphasizing that the underlying nature of the transactions dictates their legal status:
“The substance of the sports event contracts offered on Kalshi’s DCM is sports gambling, regardless of whether Kalshi calls them swaps. Just as ‘that which we call a rose by any other name would smell as sweet,’ placing sports bets, even when called by another name, is still gambling.”
The court highlighted that users on the platform can effectively execute prop bets, wager on point spreads, predict specific scores, or assemble multi-leg parlays, with payouts entirely contingent upon the athletic performance of sports teams or individual players. Additionally, Judge Nelson affirmed that the Commodity Futures Trading Commission (CFTC) functions strictly as a financial market regulator and “is not a gambling regulator.”
Deepening Circuit Split and Potential Supreme Court Review
The unanimous Ninth Circuit ruling widens an existing split across United States appellate courts. It directly contrasts with a prior ruling from the Third Circuit in KalshiEX LLC v. Flaherty, which concluded that the CFTC held primary jurisdiction over Kalshi rather than state authorities.
With the Ninth Circuit establishing the opposite legal interpretation, ruling that sports event contracts do not constitute exempt “swaps” under the CEA, Kalshi now holds the option to file a petition for a writ of certiorari seeking review by the U.S. Supreme Court. Alternatively, Kalshi can request an en banc rehearing before an expanded 11-judge panel of the Ninth Circuit. Meanwhile, New Jersey faces a September 3 deadline should it choose to petition the Supreme Court following the Third Circuit’s decision.
