Kalshi has suffered a setback in its fight over who gets to regulate sports-related prediction contracts listed on its federally licensed exchange. A unanimous panel of the U.S. Court of Appeals for the Ninth Circuit said Nevada regulators may oversee the company’s sports event contracts, rejecting Kalshi’s position that federal oversight alone governs trading on its platform.
The decision sharpens a growing conflict between federal and state authority in the prediction market sector. It also deepens a split with an earlier federal ruling involving New Jersey, leaving the legal status of these contracts unsettled across jurisdictions and increasing the possibility of further appeals.
Court rejects broad preemption argument
At the center of the case was Kalshi’s claim that the Commodity Futures Trading Commission, acting under the Commodity Exchange Act, is the exclusive regulator of its exchange. Kalshi argued that because it operates on a CFTC-regulated platform, state authorities should not be able to apply their own gambling rules to the contracts in question.
The Ninth Circuit disagreed. The panel concluded that the federal statute does not clearly preempt Nevada’s gaming laws as applied to Kalshi’s sports event contracts. In practical terms, that means Nevada is not barred from asserting oversight simply because the exchange is federally licensed.
Nevada’s position on sports contracts
Nevada authorities have argued that Kalshi’s activity falls within the state’s prohibition on illegal wagering. State regulators pointed to their ongoing enforcement posture and earlier orders as part of their case for maintaining authority over the company’s sports-related markets.
The appellate ruling gives support to that view, at least for now, by allowing Nevada to continue treating the issue as one that can be addressed under state gaming regulation rather than leaving it exclusively to federal commodities law.
A widening split with other federal rulings
The Nevada ruling stands in tension with an earlier federal court decision involving New Jersey, where a judge previously found that the state could not regulate Kalshi in the same way. That divergence creates a clearer split in how courts are approaching the relationship between state gambling law and federally supervised prediction markets.
Because the two rulings point in different directions, the broader legal framework remains uncertain. The conflict is especially important for companies trying to offer event-based contracts nationwide while facing very different interpretations of state power.
What comes next
Kalshi said it would seek further review and continues to maintain that federal law should prevent states from interfering with trading on a federally licensed exchange. Nevada, by contrast, is still arguing that its consumer protection and gaming rules apply to these contracts.
For now, the confirmed next step is continued litigation. With the Ninth Circuit backing Nevada and another federal ruling reaching a different result in New Jersey, the dispute may ultimately need to be resolved by a higher court, potentially the U.S. Supreme Court.
Source: www.coindesk.com