Kalshi has suffered another legal setback after a U.S. appeals court ruled that Nevada can potentially apply its gambling laws to the company’s sports-related prediction contracts. The decision also deepens a growing disagreement among federal courts that could eventually require intervention from the U.S. Supreme Court.

A unanimous panel of the U.S. Court of Appeals for the Ninth Circuit rejected Kalshi’s argument that Nevada has no authority over its sports event contracts because the company operates through an exchange regulated by the Commodity Futures Trading Commission under the Commodity Exchange Act.

The judges found that the CEA likely does not override Nevada’s gaming regulations in this case. They also rejected Kalshi’s argument that its sports contracts qualify as swaps subject solely to federal oversight, concluding that the products involved were sports bets under federal commodities law.

Ruling Creates New Legal Divide

Rather than providing a final answer for the prediction market industry, the decision adds to the uncertainty surrounding event contracts.

A separate federal court reached the opposite conclusion in April when it ruled that New Jersey could not regulate Kalshi. The conflicting judgments create a growing split over the respective powers of federal regulators and state gambling authorities.

The disagreement could eventually place the issue before the Supreme Court.

CFTC spokesperson Zach Fulton criticized the Ninth Circuit’s interpretation, arguing that the panel incorrectly applied the Commodity Exchange Act. He said contracts structured as swaps should be treated as swaps regardless of the subject matter involved, with federal law providing only limited exceptions.

According to Fulton, the appeals court effectively created an exception that does not exist in the statutory language.

Nevada Says Sports Contracts Are Gambling

Nevada regulators have been challenging prediction market operators since 2025, maintaining that sports event contracts constitute wagering and therefore must comply with state gambling laws.

Kalshi has already stopped offering its products in Nevada and several other jurisdictions after facing local regulatory actions. Nevada officials nevertheless viewed the latest ruling as support for their position.

Mike Dreitzer, chairman of the Nevada Gaming Control Board, said the decision reinforces the state’s argument that Kalshi’s sports contracts are forms of sports betting and should be regulated by state authorities.

The court also discussed similar sports-related products offered by Robinhood and Crypto.com, potentially extending the significance of the case beyond Kalshi.

Kalshi Prepares for Further Review

Kalshi highlighted a portion of the ruling that it considers favorable to its position.

Dani Lever, a company spokesperson, said the Ninth Circuit agreed with the Third Circuit that federal law limits states’ ability to regulate trading conducted on federally licensed exchanges such as Kalshi.

However, the company remains opposed to the court’s conclusion regarding sports contracts. Kalshi maintains that existing CFTC regulations do not prohibit such products and noted that the federal agency is working on possible regulatory clarification.

The company said it intends to pursue additional review of the decision.

Wider Prediction Market Battle

The case is part of a broader regulatory fight between prediction market companies and state authorities across the United States.

Kalshi and other operators have been involved in multiple lawsuits and regulatory disputes, with cases moving through both state and federal courts. Connecticut filed another lawsuit against the industry earlier this week.

Meanwhile, the CFTC has launched legal challenges of its own, arguing that federal law gives the agency exclusive jurisdiction over Kalshi and similar prediction market businesses.

Traditional sports betting companies welcomed the Ninth Circuit decision. The American Gaming Association described the ruling as a positive development for consumer protection and state revenues, while criticizing Kalshi and other platforms for offering sports betting products outside established state regulatory systems.

With federal courts now divided over the issue, the legal status of sports prediction contracts remains unsettled. The growing conflict could lead to additional appeals and ultimately force the Supreme Court to determine where federal oversight ends and state gambling authority begins.