9th Circuit Rules Kalshi Sports Contracts Are Bets Not Swaps, Setting Up Circuit Split

Two federal appeals courts have reached opposite conclusions on whether the Commodity Exchange Act preempts state sports betting laws when applied to Kalshi’s prediction market products. The U.S. Court of Appeals for the 9th Circuit sided with Nevada, holding that sports event contracts are sports bets rather than swaps. The decision directly conflicts with an April ruling from the 3rd Circuit that treated the same contracts as swaps shielded by federal preemption.

The split means legal treatment of these products now varies by geography. In some circuits sports event contracts receive federal protection; in others states may enforce licensing requirements that prediction market operators have shown no willingness to meet. Sportico reports that Supreme Court review becomes more probable once such divisions appear, because uniform application of federal law is a core judicial concern.

Core Holdings in the 9th Circuit Opinion

Judge Ryan Nelson, joined by Judge Bridget Bade, wrote that Kalshi’s contracts carry every hallmark of sports betting. The opinion notes the company once advertised itself as offering legal sports betting in all 50 states yet now claims sports betting rules do not apply. Nelson rejected a broad reading of the Dodd-Frank definition of “swaps,” which turns on whether an agreement depends on the occurrence of an “event” associated with financial consequence. He observed that ordinary usage does not describe a Dodgers World Series win or a specific point spread as an “event.”

The panel invoked Supreme Court precedent requiring common sense when deciding whether Congress meant to assign major economic subjects to an agency through vague language. Nelson concluded it would strain credulity to treat a wager at a Caesars Sportsbook and an identical position on Kalshi’s platform as legally distinct. A concurring opinion by Judge Kenneth Lee agreed that few people would describe a Mets loss as an “event” tied to the sort of commercial consequence expected in swap contracts.

Why the Split Points Toward Supreme Court Review

The 3rd Circuit had accepted Kalshi’s argument that CFTC oversight of designated contract markets displaces conflicting state rules. That position is now in direct tension with the 9th Circuit’s view that the CEA was never intended to transform the CFTC into a national gambling regulator or override decades of specific gaming legislation such as PASPA. Justice Samuel Alito has already extended the deadline for New Jersey to seek certiorari on the 3rd Circuit decision. With the split now formalized, the minimum four justices needed to grant review may find the question warrants attention.

Resolution would clarify the boundary between federal commodities regulation and state authority over sports wagering. The outcome will affect not only sportsbooks and prediction platforms but also election markets and any sector where federal and state rules intersect on event-based contracts.

Reporting: Sportico

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