By Jonathan Stempel and Nate Raymond
Aug 28 (Reuters) – A federal appeals court said Kalshi cannot block Nevada gaming regulators from overseeing its prediction markets platform, raising the stakes in a nationwide battle over whether such platforms allow illegal gambling and who may regulate them.
In a 3-0 decision, the 9th U.S. Circuit Court of Appeals in San Francisco said Kalshi was unlikely to show that the federal Commodity Exchange Act preempted Nevada from requiring a gaming license to offer contracts that let people bet on the outcomes of sports events.
Friday’s decision creates a split with the 3rd U.S. Circuit Court of Appeals in Philadelphia, which in a divided April 6 ruling said New Jersey cannot regulate Kalshi’s platform.
It increases the possibility that the Supreme Court may eventually decide whether states or the U.S. Commodity Futures Trading Commission should regulate the fast-growing prediction markets industry.
The CFTC, under Republican President Donald Trump, has claimed exclusive oversight of prediction markets and challenged regulatory activity in nine states, including New York.
At least four states — Nevada, Massachusetts, Michigan and Washington — have won court orders restricting Kalshi’s activities. New Jersey has until September 3 to appeal the 3rd Circuit decision.
Kalshi and the CFTC did not immediately respond to requests for comment.
“The court confirmed what has been clear since the beginning — that states regulate sports betting, and the CFTC has nothing to do with it,” said Nicole Saharsky, a lawyer with Mayer Brown who argued the case for the Nevada Gaming Control Board.
Prediction markets offered by Kalshi, Polymarket, Coinbase, Gemini Titan and others have soared in popularity since the U.S. presidential election in 2024, when they fared better than pollsters in predicting Trump’s victory over Democrat Kamala Harris.
Though best known for allowing sports wagers, Kalshi’s platform alone also lets people wager on elections, economics, the weather and cultural events such as who will win the Oscars.
CFTC NOT A NATIONAL GAMBLING REGULATOR, JUDGE SAYS
Kalshi and the CFTC have said sports event contracts are “swaps” under the 2010 Dodd-Frank financial reforms, affording the agency oversight through its authority to regulate national swaps markets.
Circuit Judge Ryan Nelson, however, said Kalshi’s contracts have the hallmarks of sports betting, “a quintessential form of gambling” that the CFTC does not regulate.
He also said Kalshi even advertised itself as “the first app for legal sports betting” in all 50 U.S. states.
“It is difficult, then, to conclude that Congress intended to upend its decades of careful regulation of gambling based on broad definitions of the words used in a Wall Street Reform Bill,” Nelson wrote.
“The CFTC is not a national gambling regulator,” Nelson added. “No one suggested it was until over a decade after the law was passed.“
All three judges on Friday’s panel are Trump appointees. The appeals court judges who decided the New Jersey case were appointed by Republican presidents.
“Calling a sports bet a ‘swap’ doesn’t make it one,” said Arizona Attorney General Kris Mayes, who in March filed criminal charges accusing Kalshi of running an illegal gambling business. “Financial reform legislation was never intended to strip states of their traditional police power over gambling, and I’m glad the court said so clearly.”
Friday’s decision upheld a November 2025 ruling by Chief Judge Andrew Gordon in Las Vegas federal court, dissolving an injunction from seven months earlier that let Kalshi continue offering sports event contracts in Nevada.
Gordon’s original injunction did not address Kalshi’s election contracts, which Nelson said are illegal under Nevada law and a much smaller part of Kalshi’s business. The appeals court returned the case to him to review those contracts.
(Reporting by Jonathan Stempel in New York and Nate Raymond in Boston; Editing by Cynthia Osterman)
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