The Ninth U.S. Circuit Court of Appeals ruled that sports-event contracts in prediction markets aren’t “swaps” or financial contracts that exchange cash flows, investments, or liabilities. The ruling, KalshiEX, LLC v. Assad, No. 25-7516, held that sports-event contracts in prediction markets aren't swaps or financial contracts that exchange cash flows, investments, or liabilities.
On Friday, August 28, the Ninth Circuit sided with the Nevada Gaming Control Board by rejecting prediction market requests for injunctive relief against it.
This came after Kalshi and Crypto.com sued Nevada regulators seeking an injunction against enforcement, after Nevada claimed sports contract trading on their platforms was an unlicensed gambling offering.
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The Background
Kalshi and similar platforms argue their event contracts are federally regulated financial instruments that preempt state gambling law, a position several states dispute. Nevada, New Jersey, and Michigan were among the states that issued cease-and-desist orders against Kalshi in March 2025, arguing the platform lacked the license required of a gambling operator.
Kalshi and similar platforms retaliated by arguing that prediction markets were “swaps” or commodities trading, and not gambling.
The most recent case was New Jersey v. Kalshi, in which New Jersey sought to prevent Kalshi from offering collegiate sports betting services. However, on April 6, 2026, the Third U.S. Circuit Court of Appeals ruled in Kalshi's favor, stating that the State of New Jersey cannot prevent Kalshi from letting people use this platform for sports event trading.
This culminated in New Jersey asking the Supreme Court to
.
Just as Kalshi took the path against New Jersey on the Appellate Court after receiving the cease-and-desist letter, it did the same with Nevada.
The Ninth Circuit Court of Appeals Arguing
Kalshi, along with a few other Prediction markets (Crypto.com and Robinhood), and their federal regulator, the Commodity Futures Trading Commission, claimed that all event contracts were swaps. The CFTC even sued several states to regain control over regulating prediction markets.
Despite this, the court rejected all appeals, ruling that sports event contracts aren't swaps but sports bets, clearing the way for Nevada and other Ninth Circuit states to enforce their gambling laws against these platforms.
What’s Next?
While Kalshi and other platforms from the
list of prediction markets
cannot offer sports event trading based on the Ninth Circuit ruling, the case probably isn’t over yet.
Kalshi’s head of litigation (Jovy Dedaj) stated that the Ninth Circuit “overstepped” by declaring sports-related event contracts not as swaps. This contradicted the Third U.S. Circuit Court of Appeals' ruling, which gave the CFTC exclusive jurisdiction over sports-related event contracts on Kalshi’s platform.
The U.S. Supreme Court will likely have the final say in this dispute, as most circuit splits (contradictory rulings from Appellate Courts) are ultimately resolved by the Supreme Court. “Ultimately, this is the kind of legal controversy or legal difference of opinion which will make its way to the Supreme Court”, said Joshua Mitts, a Columbia Law School professor.
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