Federal Appeals Court Deals Legal Setback To Kalshi Over State Regulatory Powers

Kalshi suffered a significant legal defeat Friday after a federal appeals court ruled that Nevada regulators do have authority over the prediction market platform’s sports-related event contracts, deepening a growing legal divide across the US court system.

Ninth Circuit Rules Against Federal Preemption Argument

The US Court of Appeals for the Ninth Circuit unanimously rejected Kalshi’s argument that its federal regulatory oversight through the Commodity Futures Trading Commission should override state gaming laws. The court determined that Kalshi’s sports-related contracts function as sports bets rather than qualifying as regulated swaps under federal commodities law, meaning state oversight can apply.

Ruling Creates Conflict Between Federal Courts

The decision directly contradicts an earlier ruling from a different federal appeals court in April, which found that New Jersey lacked authority to regulate Kalshi’s operations. This growing disagreement between courts increases the likelihood that the US Supreme Court will eventually need to resolve the broader legal question surrounding prediction markets nationwide.

Regulators And Industry Groups React Strongly

Nevada’s gaming regulator called the ruling a validation of the state’s long-standing position that such platforms should be treated as regulated sports betting. Meanwhile, the CFTC pushed back strongly against the court’s reasoning, arguing that derivative contracts should be classified as swaps regardless of their underlying subject matter.

Kalshi Vows To Continue Legal Fight

Kalshi maintains that federal law should prevent state-level regulation of trading conducted on a federally licensed exchange and confirmed plans to pursue further legal review. The company has already withdrawn from several states amid ongoing regulatory disputes, including a new lawsuit recently filed in Connecticut.

Traditional sports betting industry groups welcomed the ruling, framing it as an important step toward stronger consumer protections and stricter oversight of prediction market platforms nationwide.