Kalshi loses Nevada appeal as court backs state oversight of sports contracts

Kalshi suffered a significant legal setback Friday after a federal appeals court rejected its effort to block Nevada from applying state gaming regulations to its sports event contracts.

The U.S. Court of Appeals for the Ninth Circuit unanimously ruled that the Commodity Exchange Act likely does not prevent Nevada from enforcing its gambling laws against Kalshi.

The decision challenges a central argument behind Kalshi’s legal strategy. The company has maintained that because it operates as a federally regulated derivatives exchange under the Commodity Futures Trading Commission, states cannot separately regulate contracts offered on its platform.

The Ninth Circuit found that Kalshi’s sports event contracts likely do not qualify as swaps under federal commodities law. That distinction weakens the argument that the contracts fall exclusively within the CFTC’s jurisdiction and opens the door for Nevada gaming authorities to regulate them as sports betting products.

The ruling adds another layer of uncertainty to the rapidly expanding prediction market industry.

A separate federal appeals court reached a different conclusion earlier this year in a dispute involving New Jersey, limiting the state’s ability to regulate Kalshi. 

The conflicting decisions create a widening disagreement among federal courts over where federal commodities regulation ends and state gambling authority begins.

The split could increase the likelihood that the issue eventually reaches the U.S. Supreme Court.

Nevada regulators have challenged prediction market operators since 2025, arguing that sports event contracts amount to wagering and therefore fall under state gambling laws. 

Kalshi has already stopped offering its products in Nevada and several other jurisdictions following regulatory actions.

Kalshi plans to seek further review of the Ninth Circuit decision and continues to maintain that existing CFTC regulations allow sports event contracts.

The legal dispute extends well beyond Nevada. Kalshi and other prediction market operators are involved in multiple cases against state regulators, while the CFTC has separately argued that federally regulated prediction markets should fall under its jurisdiction.

Connecticut also filed a lawsuit against Kalshi this week, adding to the growing number of state challenges facing the company.

The latest ruling leaves prediction markets operating under an increasingly fragmented regulatory framework, with federal and state authorities continuing to dispute who has jurisdiction over sports based event contracts.