Ruling finds that federal law does not pre-empt state gambling laws
The Ninth US Circuit Court of Appeals issued a ruling on Friday in support of Nevada’s efforts to prohibit Kalshi’s sports-related event contracts.
The unanimous ruling finds that the Nevada Gaming Control Board (NGCB) did not exceed its authority when it issued a cease-and-desist letter in March 2025, ordering Kalshi to stop offering its elections and sports event contracts in the state.
Kalshi had sought injunctive relief, arguing that it is not a sports betting platform but a designated contract market (DCM) under the Commodity Exchange Act (CEA). Kalshi argued that the Commodity Futures Trading Commission (CFTC) has exclusive regulatory authority over its sports event contracts, which are traded as ‘swaps’.
The Court of Appeals ruling states that Kalshi did not show a likelihood that the CEA preempts state gaming regulations as applied to its sports event contracts.
The court acknowledged that the CEA expressly preempts state regulation of swaps that are traded or executed on a DCM but found that Kalshi’s sports event contracts are not swaps because they are sports bets.
The court also noted that the CEA’s Special Rule did not give the CFTC any more preemptive authority over gaming than it gave the CFTC authority over terrorism or assassination and the other underlying excluded commodities.
It rejected Kalshi’s argument that it was impossible to comply with both Nevada law and the CEA, as well as Kalshi’s argument that field preemption applied.
The court affirmed in part the district court’s order dissolving the preliminary injunction enjoining Nevada from enforcing state laws against Kalshi’s sports-related event contracts, but said that it was for the district court to consider Nevada’s challenges to Kalshi’s election contracts.
Circuit Judge Ryan D. Nelson said: “Because we disagree with Kalshi’s overly broad reading of the CEA, and because CFTC regulations currently prohibit offering contracts related to gaming on prediction markets, we affirm the district court’s order dissolving the injunction as to sports event contracts. We remand for the district court to consider Kalshi’s election contracts.
“Additionally, Kalshi’s attempts to distinguish its sports event contracts from sportsbooks betting are unpersuasive. Kalshi argues that ‘unlike a traditional casino or ‘house,’ Kalshi’s DCM is not counterparty to any trade, does not set betting odds, does not profit when its customers lose, and has no incentives to favor itself at customers’ expense’. These are distinctions without differences. Most importantly, none of those distinctions have any connection to the statutory definition of ‘swap’. That Caesars or MGM are market makers, while Kalshi supposedly is not, is not relevant to the CEA’s definition of ‘swap’ or of the ordinary meaning of ‘bet’ or ‘wager’.
Judge Nelson added: “If there is not a difference under the CEA’s swap definition between sports betting on Kalshi and sports betting in Caesars Sportsbook, then every person placing a sports bet at Caesars Sportsbook (or anywhere else for that matter) is violating the CEA.”
NGCB chairman Mike Dreitzer commented: “We are pleased with the Ninth Circuit’s ruling today in favor 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.
“The Nevada Gaming Control Board has been regulating gaming in the state of Nevada for more than 70 years in accordance with the highest standards and best practices. We will continue to vigorously enforce Nevada law to safeguard gaming in our state.”
Nevada Governor Joe Lombardo added: “Prediction markets offering sports-event contracts constitute gambling and must comply with Nevada’s gaming laws and regulatory framework. I commend Chairman Dreitzer and the Nevada Gaming Control Board for their diligent work to uphold Nevada’s longstanding regulatory standards, safeguard the integrity of our gaming industry, and ensure the public can continue to have confidence in its oversight.”