The Ninth Circuit prediction markets ruling, filed on 28 August 2026, hands state gambling regulators a sweeping victory over federal oversight, and, by creating a direct conflict with a Third Circuit decision from April, makes a Supreme Court showdown look almost inevitable.
A unanimous three-judge panel rejected requests for injunctive relief from KalshiEX, Crypto.com, and Robinhood Derivatives, concluding that sports-related event contracts are sports bets regulated by the states, not swaps under the purview of the Commodity Futures Trading Commission (CFTC). The Ninth Circuit opinion in KalshiEX LLC v. Assad (No. 25-7516) was authored by Circuit Judge Ryan D. Nelson, with a concurrence by Judge Kenneth K. Lee, before a panel that also included Judge Bridget S. Bade.
Judge Nelson did not mince words. ‘For Kalshi to deny that its sports event contracts are sports bets under a reasonable person’s understanding is disingenuous,’ the opinion reads, according to Bloomberg Law. ‘That sports event contracts are, in reality, sports bets is not just an “I know it when I see it.” Rather, everyone, including Kalshi, knows it when they see it.’
The 3-0 ruling affirmed the district court’s order dissolving Kalshi’s preliminary injunction against Nevada, holding that the federal Commodity Exchange Act does not preempt Nevada from requiring a gaming licence to offer contracts on sports-event outcomes, according to Reuters. The Nevada Resort Association, which represents the state’s casinos, had intervened as a co-defendant alongside the Nevada Gaming Control Board.
Nevada Gaming Control Board Chairman Mike Dreitzer was unambiguous in a statement following the decision: ‘We are pleased with the Ninth Circuit’s ruling today in favour of Nevada. This completely vindicates what we have been saying all along. This is sports betting and needs to be properly regulated by the state.’ Nicole Saharsky, a Mayer Brown lawyer who argued for the Board, put it more bluntly: ‘The court confirmed what has been clear since the beginning, that states regulate sports betting, and the CFTC has nothing to do with it.’
The Ninth Circuit Prediction Markets Ruling and the Circuit Split
The decision collides head-on with a Third Circuit ruling on 6 April 2026 in KalshiEX LLC v. Flaherty (No. 25-1922), where a divided 2-1 panel authored by Judge David J. Porter barred New Jersey’s Division of Gaming Enforcement from applying state gambling law to Kalshi. The Third Circuit found that the CFTC holds exclusive jurisdiction over sports-related event contracts.
Two appeals courts, two opposite conclusions, on the same legal question. ‘This is a classic circuit split,’ said Joshua Mitts, a professor at Columbia Law School. ‘Ultimately, this is the kind of legal controversy or legal difference of opinion which will make its way to the Supreme Court.’
Kalshi has already responded by filing a petition asking the Ninth Circuit to reconsider its ruling en banc. That avenue is unlikely to resolve the broader tension between circuits.
Stakes Are High: 80% of Volume, Nine State Lawsuits
The commercial weight of the dispute helps explain why both sides are fighting so hard. Sports-related event contracts have accounted for approximately 80% of Kalshi’s total volume since July 2024, according to DLA Piper. Strip out those contracts and the platform’s business model looks dramatically different.
The CFTC has not waited passively. On 2 April 2026, the agency filed its first lawsuits against Arizona, Connecticut, and Illinois, arguing that those states’ enforcement actions against CFTC-registered markets are preempted by the Commodity Exchange Act, according to a CFTC press release. The agency has now filed suit against nine states in total. 44 states, meanwhile, have formally argued that the CFTC has no authority over sports prediction markets.
The broader jurisdiction fight has been sharpened by the 2026 FIFA World Cup, which pushed prediction market volumes to new heights and drew greater regulatory scrutiny across the country.
Judge Lee’s concurrence added a dimension that may matter in any future Supreme Court argument: Holland & Knight notes that Lee expressly acknowledged the historical role of Indian Tribes in regulating sports gambling, reinforcing the principle that gambling regulation belongs with states and Tribes rather than with federal derivatives oversight.
Meanwhile, DraftKings jumped 7% and Flutter Entertainment, the parent of FanDuel, rose more than 6% following the ruling. Both companies have been under pressure over the past year from fears that prediction markets would cannibalise their sports-betting franchises.
With Kalshi’s en banc petition pending and the Third Circuit’s ruling pointing in the opposite direction, the question of who governs sports event contracts is now a live circuit split awaiting a cert petition. The Supreme Court’s 2026-27 term could be where prediction markets get their definitive answer.
