On Friday, a federal appeals court ruled unanimously that Nevada can enforce its gambling laws against prediction market operator Kalshi, marking a significant setback for the company and increasing the likelihood of a Supreme Court review before the onset of the 2027 NFL season.
The 3-0 decision by the US Court of Appeals for the Ninth Circuit determined that contracts tied to sports events do not fall under the category of federally regulated swaps as defined by the Commodity Exchange Act (CEA). This ruling invalidated an injunction that had previously restricted Nevada gaming regulators from imposing regulations on these financial products.
The three-judge panel’s 50-page opinion clarified that the CEA does not preempt Nevada’s gaming regulations concerning Kalshi’s sports contracts, asserting that these contracts should be treated as sports gambling, irrespective of Kalshi labeling them as “swaps.” US Circuit Judge Ryan Nelson equated a bet on the Las Vegas Raiders winning by 7.5 points at Caesars Sportsbook to a contract on the same outcome at Kalshi.
Judge Nelson even referenced a line from William Shakespeare’s “Romeo and Juliet” to illustrate his point, stating, “To call a rose by any other name would smell as sweet.” He remarked, “For Kalshi to deny that its sports event contracts are sports bets under a reasonable person’s understanding is disingenuous.”
Mike Dreitzer, Chair of the Nevada Gaming Control Board, expressed satisfaction with the ruling, emphasizing that it “completely vindicates what we have been saying all along: This is sports betting and needs to be properly regulated by the state.”
The American Gaming Association (AGA), a vocal critic of the federal regulation of prediction markets, hailed the ruling as a win for consumer protections. AGA President Bill Miller noted that the decision validates Nevada’s approach to regulating sports betting, which they argue is crucial for safeguarding state and tribal interests.
As recently as this year, the AGA reported that states had lost over $1 billion in tax revenue due to the growth of prediction markets. In contrast, the US Commodity Futures Trading Commission (CFTC) maintains that it has the exclusive authority to regulate event contracts. In March, CFTC Chair Michael Selig described state gaming commissions’ efforts to limit prediction markets as attempts to “effectively nullify federal law.”
Currently, a circuit split exists on this issue. The Ninth Circuit’s ruling diverges from a 2-1 decision made by the US Court of Appeals for the Third Circuit in the case of KalshiEX LLC vs. Flaherty, where it found that the CEA preempted New Jersey’s enforcement of state gambling laws against Kalshi. Such divergences between circuit courts often prompt the Supreme Court to consider reviewing a case of national importance.
There's ongoing interest in the potential impact of this ruling reflected in event contracts on Polymarket, where users can bet on whether the Supreme Court will hear the case by December 31. As of Friday evening, the contract saw over $976,000 in trading volume. The probability for a “yes” decision surged from around 30% to 64% following the Ninth Circuit's decision.
Additionally, New Jersey faces a September 3 deadline on whether to petition the Supreme Court for certiorari regarding this matter.
In a related political context, weeks before President Donald Trump made public remarks about prediction markets, his son, Donald Trump Jr., discussed the topic at the Republican Attorneys General Association’s winter meeting in March. Trump Jr. stated that states were misled by the gambling lobby, suggesting that the federal government already provides adequate oversight of these markets. His involvement in prediction markets stems partly from his position as a strategic advisor for Kalshi, where he received more than $300,000 in shares, which have appreciated in value recently.
As the 2026-27 NCAA college football season kicked off, predictions regarding college football were already generating significant trading volume. Reports indicated that trading volumes on Kalshi for college football prediction markets reached between $20 million and $30 million, a stark increase from the previous year.
Notably, Kalshi's trading for national championship futures exceeded $17.5 million as of Friday. In terms of player odds, Notre Dame quarterback CJ Carr emerged as the Heisman Trophy favorite at 12% alongside Ohio State's Jeremiah Smith, who returned as a top prospect this season.
Furthermore, DraftKings has ramped up its promotional efforts as the season begins, launching campaigns in populous states like California, Texas, and Florida. DraftKings Predictions recorded a notable spike in trading volume, indicating a growing interest in betting activity as teams embark on their respective campaigns.
