A federal appeals court ruled unanimously on Friday that Nevada can enforce its gambling laws against Kalshi, marking a significant setback for the prediction market operator and increasing the likelihood of a Supreme Court review ahead of the 2027 NFL season.
In a 3-0 decision, the US Court of Appeals for the Ninth Circuit determined that contracts concerning sports events do not fall under federally regulated swaps as per the Commodity Exchange Act (CEA). This ruling invalidated an injunction that had restricted Nevada gaming regulators from taking action on these financial products.
The court's 50-page opinion indicated that the CEA does not preempt Nevada’s gaming regulations concerning Kalshi’s sports event contracts. US Circuit Judge Ryan Nelson stated that these contracts should be viewed as "sports gambling" despite Kalshi’s designation of them as "swaps." He noted that there is no distinction between betting on the Las Vegas Raiders to win by 7.5 points at Caesars Sportsbook and a contract on the Raiders to win by the same margin at Kalshi.
Nelson even quoted William Shakespeare's "Romeo and Juliet," saying, "To call a rose by any other name would smell as sweet," to emphasize his point about the nature of the contracts.
"For Kalshi to deny that its sports event contracts are sports bets under a reasonable person’s understanding is disingenuous," Nelson remarked.
Mike Dreitzer, Chair of the Nevada Gaming Control Board, expressed satisfaction with the ruling, stating that it validates the opinion that these contracts are indeed sports betting and should be regulated appropriately by the state.
The American Gaming Association (AGA) has been a vocal opponent of certain federal regulations governing prediction markets, pointing to significant losses in sports betting tax revenue — over $1 billion — due to these markets’ growth. AGA President Bill Miller hailed the ruling as a crucial win for consumer protections and taxpayers, commending Nevada for defending its regulated gaming framework.
In contrast, the US Commodity Futures Trading Commission (CFTC) has consistently maintained that it holds exclusive regulatory authority over event contracts. CFTC Chair Michael Selig remarked in March that efforts by state gaming commissions to restrict these markets resemble attempts to "effectively nullify federal law." Condemning New York's $36 billion lawsuit against Kalshi, Selig asserted that the CFTC would continue to protect its jurisdiction.
A conflict emerges as the Ninth Circuit’s ruling stands in opposition to a previous ruling by the US Court of Appeals for the Third Circuit in KalshiEX LLC v. Flaherty, where a 2-1 decision on April 6 determined that the CEA preempted New Jersey’s enforcement of gambling laws against Kalshi’s sports-related event contracts. Such circuit splits often prompt the Supreme Court to consider hearing a case of national significance.
An event contract on Polymarket allows traders to speculate on whether the Supreme Court will choose to review the case by December 31. As of Friday evening, this contract had garnered over $976,000 in trading volume. The likelihood that the Supreme Court will hear the case rose significantly, with the “yes” option shifting from around 30% for most of the year to 64% following the Ninth Circuit decision. New Jersey must decide by September 3 whether to petition for Supreme Court review.
In related news, weeks prior to President Donald Trump’s first comments regarding prediction markets, Donald Trump Jr. addressed the issue at a high-profile event in New Orleans. During a closed meeting with Montana Attorney General Austin Knudsen at the Republican Attorneys General Association's winter meeting in March, Trump Jr. discussed the ongoing legal disputes related to prediction markets, suggesting that states were being misled by the gambling lobby which aims to protect its interests. Trump Jr.'s prior investment dealings with Kalshi, including receiving over $300,000 in company shares, have come under scrutiny amid these developments. A spokesman for him emphasized that he does not convey messages to the federal government for any company he advises.
While the new NCAA college football season began on Thursday with numerous games across lower divisions, it’s set to build momentum with eight more matchups on Saturday, including the Aer Lingus College Football Classic in Dublin between the University of North Carolina and Texas Christian University. By the end of Labor Day Weekend, all 138 teams in the Football Bowl Subdivision will have commenced their seasons, leading up to the college football national championship event scheduled for January in Las Vegas.
In anticipation of the season, prediction market activity has surged, with estimated trading volumes reaching between $20 million and $30 million for college football markets — a 22-fold increase from last year. On Kalshi alone, national championship futures saw trading volumes exceed $17.5 million, with Ohio State and Notre Dame emerging as co-favorites at 13% to win the title, while Texas, led by Heisman candidate Arch Manning, follows at 12%.
DraftKings is also ramping up its presence as the season commences, launching new advertisements in California, Texas, and Florida. Recently, their "combos" offerings, modeled after traditional sportsbook parlays, recorded significant trading volumes, notably a one-day spike in notional volume to $10 million, as reported by Aldrin Research.
