A fresh debate over whether U.S. states or the Commodity Futures Trading Commission (CFTC) should regulate the fast-growing prediction markets industry has emerged after a federal appeals court ruled that Kalshi cannot block Nevada gaming regulators from overseeing its platform.

Prediction markets platform Kalshi and the CFTC have argued that sports event contracts are "swaps" under the 2010 Dodd-Frank financial reforms, which affords the agency oversight through its authority to regulate national swaps markets. Kalshi is registered with the CFTC as a designated contract market, and the growth of event contracts tied to sports outcomes has drawn increasing scrutiny from state gaming regulators, who have historically held exclusive authority over sports betting within their borders.

Ripple CTO Emeritus David Schwartz engaged with an X post from sports betting and gaming lawyer Daniel Wallach, who argued that the CFTC's rulemaking is effectively "dead on arrival" because of the major-questions doctrine, which limits federal agencies from claiming broad powers without clear authorization from Congress. The doctrine has gained prominence in recent years, most notably in the Supreme Court's 2022 West Virginia v. EPA decision, and has since been invoked to challenge assertions of expansive federal regulatory authority across a range of industries.

Schwartz responded that this premise might be incorrect, arguing that the central question is narrower: whether Congress actually delegated the authority to regulate gambling through exchange-traded contracts.

"This seems to be incorrect to me. The question is only whether Congress delegated the power to regulate gambling through exchange-traded contracts. As Kalshi correctly points out, traditional sportsbook gambling is very different," Schwartz wrote.

This seems to be incorrect to me. The question is only whether Congress delegated the power to regulate gambling through exchange traded contracts. As Kalshi correctly points out, traditional sportsbook gambling is very different. — David 'JoelKatz' Schwartz (@JoelKatz) August 28, 2026

This seems to be incorrect to me. The question is only whether Congress delegated the power to regulate gambling through exchange traded contracts. As Kalshi correctly points out, traditional sportsbook gambling is very different.

Explaining further what he meant, Schwartz stated: "Of course Congress didn't intend to replace state-regulated sportsbook gambling with exchange-traded products outside of state regulation. It meant to create a new, uniform federal framework for creating exchange-traded products outside of state regulation."

What Happened?

The legal dispute began in March 2025, when the Nevada Gaming Control Board sent Kalshi a cease-and-desist letter claiming that Kalshi's sports-event contracts constituted an unlicensed sports pool under state gaming law.

Kalshi argued that the CFTC's authority over swaps preempted Nevada's gaming rules.

On Friday, the 9th U.S. Circuit Court of Appeals in San Francisco upheld Nevada's oversight of prediction markets. Circuit Judge Ryan Nelson said Kalshi's contracts have the hallmarks of sports betting, "a quintessential form of gambling" that the CFTC does not regulate.

"The CFTC is not a national gambling regulator," Nelson said, adding that "it is difficult, then, to conclude that Congress intended to upend its decades of careful regulation of gambling based on broad definitions of the words used in a Wall Street Reform Bill."

The ruling leaves open how other states will treat sports-event contracts offered on federally regulated exchanges, and whether further appellate review or congressional action will be sought to resolve the split between federal swaps regulation and state gaming oversight.