A federal appeals court ruled unanimously on Friday that Nevada may enforce its gambling laws against the prediction market operator Kalshi, dealing the company a substantial defeat and sharpening a legal conflict that now looks bound for the US Supreme Court. The 3-0 decision by the US Court of Appeals for the Ninth Circuit found that sports event contracts do not qualify as federally regulated swaps under the Commodity Exchange Act. In doing so, the panel quashed an injunction that had restrained Nevada gaming regulators. The outcome collides directly with an earlier ruling from the Third Circuit, setting up the kind of split that often forces the high court’s hand.
What the Ruling Means for the Prediction Market Sector
The decision reframes the regulatory fight over event contracts at a moment when trading volume on sports outcomes is climbing fast. For operators, the practical question is no longer theoretical: state gaming boards now have appellate backing to treat these products as wagers. Here is what the ruling changes on the ground.
- State enforcement gains teeth. The Ninth Circuit’s finding that the CEA “likely does not preempt” Nevada’s gaming rules gives regulators across the western states a template to act on sports event contracts.
- The circuit split is now unavoidable. With the Third Circuit siding with Kalshi and the Ninth Circuit against it, the odds of Supreme Court review have jumped, a shift the betting markets themselves have already priced in.
- Tax revenue is the quiet driver here. The American Gaming Association estimates states have forfeited more than $1 billion in sports betting tax receipts to prediction markets.
- Jurisdictional whiplash for operators. Companies running national platforms now face a patchwork where the same contract may be lawful in New Jersey and contested in Nevada.
- DraftKings, Polymarket and Kalshi are all expanding aggressively into college football markets even as the legal ground shifts beneath them.
A Rose, a Raiders Bet, and Judicial Skepticism
Writing for the panel across a 50-page opinion, US Circuit Judge Ryan Nelson dismissed the semantic line Kalshi has drawn between “swaps” and “bets.” A wager on the Las Vegas Raiders to cover a 7.5-point spread at Caesars Sportsbook, he reasoned, is functionally identical to a contract on the same spread at Kalshi. Nelson reached for Shakespeare to make the point, invoking the line that a rose “by any other name would smell as sweet.”
He went further. “For Kalshi to deny that its sports event contracts are sports bets under a reasonable person’s understanding is disingenuous,” Nelson wrote. It is rare for an appellate opinion to accuse a litigant of bad faith quite so plainly.
Nevada Gaming Control Board Chair Mike Dreitzer called the ruling a full vindication. “This is sports betting and needs to be properly regulated by the state,” he said.
Two Regulators, One Contested Turf
The dispute sits on a fault line between state gaming authorities and the federal Commodity Futures Trading Commission, and neither side is retreating. The AGA, long the most vocal critic of federal oversight for these products, praised Nevada for “protecting the state- and tribal-regulated gaming framework.” AGA President Bill Miller framed the outcome as “a significant win for consumer protections and taxpayers.”
The CFTC sees it differently. Chair Michael Selig told CNBC in March that coordinated state efforts to restrict prediction markets amounted to an attempt to “effectively nullify federal law.” After New York filed a $36 billion suit against Kalshi last month, Selig pledged the agency would “continue to defend its jurisdiction.” A CFTC spokesperson did not immediately respond to a request for comment.
Which raises a harder question: when two federal-versus-state readings of the same statute point in opposite directions, whose interpretation governs a nationwide platform?
The Numbers Behind the Split
| Case / Metric | Court or Source | Outcome |
|---|---|---|
| Kalshi v. Nevada | Ninth Circuit (3-0) | CEA does not preempt state gaming law; injunction quashed |
| KalshiEX LLC v. Flaherty | Third Circuit (2-1, 6 April) | CEA preempts New Jersey enforcement against Kalshi contracts |
| Estimated state tax revenue lost | AGA calculator | More than $1 billion attributed to prediction market growth |
| Supreme Court cert timing contract | Polymarket | Over $976,000 in volume; “yes” jumped from ~30% to 64% on Friday |
New Jersey faces a 3 September deadline to petition the Supreme Court for certiorari. That date, more than any judicial signal, may determine how quickly the split gets resolved.
The Trump Connection Surfaces
Weeks before President Donald Trump made his first public remarks on prediction markets, Donald Trump Jr. addressed the topic at the Republican Attorneys General Association’s winter meeting in New Orleans. In a fireside chat with Montana Attorney General Austin Knudsen in March, Trump Jr. reportedly told state officials they were being led astray by a gambling lobby with a “vested interest” in protecting its turf, according to a 2,600-word New York Times feature published 27 August. He argued the markets already carried strong federal oversight, the Times reported, citing four people familiar with the closed-door remarks.
His financial stakes are not incidental. Trump Jr. received more than $300,000 in Kalshi shares upon joining as a strategic advisor, and later took a Polymarket stake through 1789 Capital, where he is a partner. A spokesman said he “does not interface with the federal government on behalf of any company he invests in or advises.”
The president himself has said little. Asked about the exchanges at a White House briefing in April, he offered only that “the whole world, unfortunately, has become somewhat of a casino.”
College Football Volume Signals the Stakes
The ruling lands as the 2026-27 college football season opens, and the money already moving through these platforms explains why the fight matters. Prediction market customers recorded between $20 million and $30 million in college football volume, a 22x increase from last year on a trailing 30-day basis, per The Event Horizon. On Kalshi alone, national championship futures topped $17.5 million by Friday afternoon, with Ohio State and Notre Dame co-favourites at 13%.
DraftKings is pressing its advantage. The operator launched new ads for DraftKings Predictions in California, Texas and Florida this week, and its parlay-style “combos” surged from $170,600 in notional volume on Wednesday to $10 million on Thursday, a one-day spike of 277% per Aldrin Research.
All 138 Football Bowl Subdivision teams will have played by the end of Labor Day weekend. The road ends in Las Vegas, which hosts the college football national championship for the first time. A fitting destination, given what the courts are now arguing over.
Frequently Asked Questions
What did the Ninth Circuit actually decide?
The court ruled 3-0 that sports event contracts are not swaps under the Commodity Exchange Act, meaning federal law likely does not preempt Nevada’s authority to regulate them as sports gambling. The prior injunction shielding Kalshi was vacated.
Why does the circuit split matter?
Because the Third Circuit reached the opposite conclusion in April. When appeals courts disagree on a federal question of national importance, the Supreme Court is far more likely to grant review.
Is Kalshi barred from operating?
Not outright. The ruling removes the injunction that limited Nevada regulators, but the broader question of enforcement, and how other states respond, is still playing out.
How large is the market at stake?
Sizeable and growing fast. College football volume alone climbed to as much as $30 million, and the AGA pegs lost state tax revenue north of $1 billion.
When could the Supreme Court weigh in?
New Jersey must decide by 3 September whether to petition for certiorari. Traders on Polymarket now put the chance of the court hearing the case by year-end at 64%.
