Kalshi has suffered a significant legal setback after a U.S. federal appeals court rejected the company's argument that Nevada has no right to regulate its betting activity, ratcheting up legal pressure on Kalshi and the broader U.S. prediction market industry.

A unanimous panel of the U.S. Court of Appeals for the Ninth Circuit issued its decision on Friday, disagreeing with Kalshi's position that Nevada regulators have no role in overseeing its business, which is conducted on a platform regulated by the Commodity Futures Trading Commission (CFTC) under the Commodity Exchange Act (CEA). The ruling adds another layer to an already fragmented regulatory landscape, where prediction markets have been expanding faster than the legal framework around them has settled.

"The panel concluded that the CEA likely does not preempt Nevada's gaming regulations as applied to Kalshi's sports event contracts," the ruling stated. The decision disputed that the activity qualifies as "swaps" trades falling under the CFTC's jurisdiction, finding that under U.S. commodities law, "the sports event contracts were not 'swaps' because they were sports bets."

Rather than slamming the door on the increasingly popular form of retail trading, the ruling further muddies the legal waters. In April, a different federal court reached the opposite determination, telling New Jersey it had no business regulating Kalshi. With courts now issuing conflicting decisions, it appears even more likely that the U.S. Supreme Court will have to take up the industry's core question.

"The Ninth Circuit has now teed up a circuit split that calls out for resolution by the Supreme Court," CFTC spokesman Zach Fulton said in an email, accusing the judges of misreading the law. "A derivative contract structured as a swap is a swap regardless of the underlying subject matter; the only exceptions in statute are onions and movie box office receipts. The Ninth Circuit erred today when it invented a new and atextual exception to the CEA."

Nevada state authorities have opposed the prediction markets businesses since 2025 and reiterated on Friday that Kalshi has been engaged in illegal wagering under Nevada's gambling laws, although Kalshi had already pulled out of Nevada and other jurisdictions in response to local orders. The dispute matters beyond a single state because similar products have drawn scrutiny from regulators and lawmakers over whether they belong in commodities markets, gambling regimes, or some overlap of both.

"This completely vindicates what we have been saying all along," Nevada Gaming Control Board Chairman Mike Dreitzer said in a statement responding to the ruling, which also referenced the betting at Robinhood and Crypto.com. "This is sports betting and needs to be properly regulated by the state."

Primary sources:

• Ninth Circuit opinion (PDF)
• Nevada Gaming Control Board press release (PDF)