Ninth Circuit panel looks to side with Nevada over Kalshi
A panel of judges on the Ninth Circuit Court of Appeals in San Francisco has appeared to side with Nevada regulators during arguments in an ongoing legal dispute involving prediction market platforms Kalshi and Crypto.com.
The case comes down to whether prediction platforms like Kalshi, which offer event-based contracts on sporting results, fall under federal regulation or if they must comply with Nevada’s gambling laws.
In a civil enforcement action against Kalshi in February, state officials argued that the platforms are offering sports betting without state licensing or regulation.
According to the Nevada Current, during arguments, judges questioned whether federal law should outrank Nevada’s authority. Their uncertainty suggested they may not be about to take the side that the platforms qualify as financial instruments outside state jurisdiction.
During the panel, Washington, DC, attorney Nicole Saharsky, who was representing the state of Nevada, argued that taking away Nevada’s power here could have negative consequences.
“It would be a huge deal. It would take away the power from the states. It would have financial consequences. For the state of Nevada, it’s like a third of the general fund that comes from gaming revenues,” Saharsky said.
She also brought up a 2011 federal rule published by the Commodity Futures Trading Commission, Rule 40.11, that appears to prohibit gambling-related trades. Judge Ryan Nelson appeared to agree, saying that the language surrounding the rule meant that event contracts should not be up on platforms.
Although no decision had been made, Nelson said the panel would rule as quickly as possible.
Charlotte Capewell brings her passion for storytelling and expertise in writing, researching, and the gambling industry to every article she writes. Her specialties include the US gambling industry, regulator legislation, igaming, and more.
Verticals:
Sectors:
Topics:
Dig Deeper
Related stories
The Backstory
Why Nevada’s case against Kalshi matters now
Nevada’s long-running clash with prediction market platform Kalshi has turned into a test of whether event-based contracts that key off sports outcomes are financial instruments or unlicensed bets. The dispute has moved from cease-and-desist letters and emergency injunctions to a high-stakes appeal, with a Ninth Circuit panel signaling skepticism that federal commodities law shields Kalshi from state gambling rules. The path to that appellate moment ran through months of filings, injunctions and intensifying enforcement in Carson City and beyond.
From cease-and-desist to a federal courtroom
Kalshi’s Nevada fight began after state regulators sent the company a cease-and-desist letter that challenged its sports contracts as unlawful wagering under state law. Kalshi countered in March with a federal lawsuit asserting that its markets fall under exclusive oversight by the Commodity Futures Trading Commission, not state gaming agencies. As the case took shape, a federal judge said he would move quickly because the outcome could affect the sports betting sector far beyond Nevada. That early signal of urgency framed a broader conflict over jurisdiction and market structure described in reporting on the judge’s plan to expedite a ruling.
The industry’s largest stakeholders sought a formal voice. Citing competitive harm if unlicensed prediction products could operate alongside heavily regulated sportsbooks, the Nevada Resort Association won permission to intervene. The court agreed that a Kalshi victory could put licensed operators at a disadvantage on issues such as age restrictions and permissible bet types, as detailed when the Resort Association was allowed to join the lawsuit.
A turning point: Judge Gordon’s ruling
The legal tide shifted when U.S. District Judge Andrew Gordon dissolved a preliminary injunction that had allowed Kalshi’s sports markets to continue while the case played out. In his decision, the judge found that event contracts tied to sports outcomes functioned as bets rather than swaps and therefore were not within the CFTC’s exclusive domain. The ruling, covered in depth in reporting on the federal judgment against Kalshi, cleared the way for Nevada’s regulators to resume enforcement. The order referenced Kalshi’s offerings linked to the timing of football touchdowns in concluding that these were sports wagers under state law.
Kalshi immediately sought emergency relief to pause the order while it appealed, warning of potential criminal exposure and disruptions to ongoing trading. The appeal would become the bridge to the Ninth Circuit, where the broader question—federal preemption versus state police power over gambling—would take center stage.
Defiance, escalation and a broader sweep
Even after the injunction was lifted, Kalshi did not shut off Nevada access to its sports contracts, according to state officials. The Nevada Gaming Control Board said it had reached interim stand-down deals with other platforms, including Robinhood and Crypto.com, but not with Kalshi. The standoff, and Kalshi’s request for a stay pending appeal, were outlined in coverage of the company’s refusal to stop operating and in local reporting that Kalshi resisted a judge’s directive to halt sports contracts in the state, as noted by the Las Vegas Review-Journal here.
Regulators then widened the venue and the scope. The Gaming Control Board filed a civil enforcement action in Carson City District Court seeking a declaration that Kalshi’s conduct violates state law and an injunction to prevent ongoing activity. The complaint argued that promoting sports contracts as lawful nationwide undercuts Nevada’s licensed market and risks consumer harm. That next phase and the regulators’ broader posture—sweeps that included temporary action to block Polymarket before the Super Bowl and a separate move against Coinbase—were laid out in reporting on the Board’s latest enforcement step.
Alongside the civil push, the Board released case updates underscoring its intent to keep pressure on as the appellate track unfolded, including a status report in the enforcement action. Earlier public notices also documented the cease-and-desist posture, such as the agency’s March 4, 2025 press release on KalshiEX.
The federal rule at the heart of the dispute
Both sides have anchored arguments in the Commodity Exchange Act and a 2011 CFTC regulation that limits event contracts tied to gaming and certain enumerated events. Nevada has leaned on that language to argue that sports-linked predictions belong in the state’s gaming framework, not on federally regulated derivatives platforms. The Ninth Circuit panel homed in on that line, with judges questioning whether CFTC rules grant safe harbor or draw red lines against gambling instruments.
The regulation at issue, CFTC Rule 40.11, restricts event contracts based on activities like gaming and sports under its “contrary to the public interest” standard, unless specific exceptions apply. The disputes in Nevada, New Jersey and Maryland have revolved around whether platforms can classify sports propositions as swaps or options, thereby preempting state gambling oversight. Nevada officials maintain that these products are, in substance, sports bets and must meet the state’s licensing, consumer protection and age-control requirements.
The stakes reach beyond one platform. Nevada’s gaming system funds significant portions of the state budget and supports thousands of jobs. If prediction markets could offer sports outcomes without the compliance burdens borne by licensed sportsbooks, casinos argue they would face a tilted field. That competitive dynamic underpinned the Resort Association’s intervention and continues to color the litigation’s policy backdrop.
Appeals, timelines and the road ahead
After Judge Gordon’s ruling, Kalshi moved to stay enforcement while it pursued an appeal. Nevada’s Board alleges the company expanded activity during the interim, prompting the Carson City action and ongoing status filings. The appellate timetable accelerated, with the Ninth Circuit panel now weighing whether federal commodities law displaces Nevada’s core police powers over gambling or whether event contracts linked to sports simply fall outside the CFTC’s remit.
Legal analysts and industry executives expect the fight over prediction markets to continue even after the Ninth Circuit rules. Courts in other jurisdictions have reached different conclusions about how to classify event contracts, and the regulatory posture has shifted as more companies test the boundaries between derivatives and gaming. Some market participants predict the Supreme Court may eventually be asked to resolve the split.
Near term, the panel’s decision will determine whether Nevada regulators can move forward unimpeded with civil enforcement against Kalshi or if the platform can keep its sports products live while arguing for federal preemption. The answer will signal how far states can go to police event-based trading and how much room remains for federally supervised markets to innovate on sports-related propositions without running afoul of gaming law.
