A unanimous decision from a federal appeals court has ramifications for Kalshi, the prediction market operator, as Nevada's authority to enforce state gambling laws was upheld. This ruling, issued by the US Court of Appeals for the Ninth Circuit on Friday, is significant because it enhances the likelihood of a Supreme Court review by the onset of the 2027 NFL season.
In a 3-0 verdict, the Ninth Circuit determined that sports event contracts fall outside the definition of federally regulated swaps stipulated in the Commodity Exchange Act (CEA). This ruling invalidated a previous injunction that restricted Nevada gaming regulators from overseeing the financial products offered by Kalshi.
The three-judge panel articulated in their detailed opinion that the CEA does not preempt Nevada's gaming regulations concerning Kalshi's sports event contracts. According to US Circuit Judge Ryan Nelson, these contracts should be seen as "sports gambling" despite Kalshi’s designation of them as "swaps." Judge Nelson compared betting on sports outcomes to contracts by referring to a famous quote from Shakespeare's "Romeo and Juliet," emphasizing that the essence of a wager remains unchanged regardless of its labeling.
Judge Nelson 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 that this ruling affirms their standpoint, stating: "This is sports betting and needs to be properly regulated by the state."
The American Gaming Association (AGA), which has criticized federal regulations governing prediction market activities, hailed the decision as a major victory for consumer protections. AGA President Bill Miller noted that the ruling reinforces the need for regulation to protect the state- and tribal-regulated gaming framework.
In contrast, the US Commodity Futures Trading Commission (CFTC) has argued for its exclusive jurisdiction over event contracts. In a March interview with CNBC, CFTC Chair Michael Selig argued that actions taken by state gaming commissions to restrict prediction markets aim to "effectively nullify federal law." Selig reaffirmed the CFTC's intent to uphold its regulatory authority in light of New York's $36 billion lawsuit against Kalshi.
The Ninth Circuit's ruling stands in opposition to a prior decision from the US Court of Appeals for the Third Circuit, which ruled in favor of Kalshi in the case of KalshiEX LLC v. Flaherty. That panel, in a 2-1 vote on April 6, concluded that the CEA permits Kalshi to operate without New Jersey's state gambling laws being applied. Such conflicting circuit rulings could encourage the US Supreme Court to take up the case due to its national significance.
One event contract on Polymarket currently allows users to bet on whether the Supreme Court will agree to hear the case by December 31. As of Friday evening, this contract showed more than $976,000 in trading volume. Following the court ruling, the likelihood of the “yes” option increased from 30% to 64%. New Jersey must decide by September 3 whether to petition the Supreme Court for certiorari.
In related news, Donald Trump Jr. recently addressed prediction markets at a Republican Attorneys General Association meeting, highlighting the ongoing legal skirmish surrounding them. He articulately suggested that lobbying efforts from the gambling industry might mislead states, emphasizing existing regulatory oversight from federal entities rather than state authorities.
Trump Jr.’s involvement with Kalshi has come under scrutiny, as he reportedly received over $300,000 in company shares upon joining the firm as a strategic advisor, with that value increasing substantially in recent months. A spokesperson clarified that Trump Jr. does not engage with the federal government regarding his investments.
On a lighter note, the 2026-27 NCAA college football season commenced on Thursday, marked by numerous games in the Football Championship Subdivision. This weekend will feature eight additional games, including a highlight match between the University of North Carolina and Texas Christian University in Dublin. By Labor Day, all 138 teams in the Football Bowl Subdivision will have completed at least one game, leading to Las Vegas hosting its first-ever college football national championship in January.
Prediction market activity related to college football has seen a surge, with CNN reporting trading volumes between $20 million and $30 million—representing a 22-fold increase from the previous year.
