Ninth Circuit Rules 3-0: Kalshi's Sports Contracts Are Not Swaps — States Can Regulate Them as Gambling
The U.S. Court of Appeals for the Ninth Circuit has ruled unanimously against Kalshi, holding that sports event contracts likely do not qualify as 'swaps' under the Commodity Exchange Act and that states may therefore regulate them as gambling. The 3-0 decision directly conflicts with the Third Circuit's April ruling in Kalshi's favor, creating a formal circuit split that virtually guarantees Supreme Court review. The Ninth Circuit's jurisdiction covers nine western states including California — the largest US market without legal sports betting — as well as Arizona, Nevada, Oregon, and Washington. New Jersey is preparing a SCOTUS petition with a September 3 deadline.
The U.S. Court of Appeals for the Ninth Circuit issued a unanimous 3-0 decision on August 28, ruling that Kalshi's sports event contracts likely do not qualify as 'swaps' under the Commodity Exchange Act and that Nevada — and by precedent, other Ninth Circuit states — can regulate them under state gaming laws. The court upheld Nevada's enforcement authority over Kalshi's sports contracts, rejecting Kalshi's argument that CFTC regulation of its designated contract market license displaces state gambling oversight. The ruling applies across the Ninth Circuit's jurisdiction: California, Arizona, Nevada, Oregon, Washington, Idaho, Montana, Alaska, and Hawaii. In California — the largest US state with no legal sports betting framework — the decision means state regulators now have appellate authority behind any enforcement action they choose to bring.
The Ninth Circuit's reasoning on the swap definition tracks Judge Oliver's August 11 Connecticut ruling and directly contradicts the Third Circuit's April decision. The Ninth Circuit panel found that Kalshi's sports event contracts do not satisfy the CEA's definition of a 'swap' because they pay out based on event outcomes — which team wins, which player scores — rather than on whether an event occurs at all. The Third Circuit reached the opposite conclusion in April, holding that the same contracts ARE swaps and therefore fall within the CFTC's exclusive jurisdiction. Two federal appellate courts have now answered the same statutory question about the same contracts in opposite directions. A circuit split on the interpretation of a federal statute is the clearest available trigger for Supreme Court review, and both Kalshi and the states have an interest in SCOTUS resolving the question definitively. New Jersey, which was on the losing side of the Third Circuit ruling, is preparing a petition for SCOTUS review with a September 3 deadline.
The Arizona implications are the most immediate. In May, the D. Arizona federal district court granted Kalshi a preliminary injunction blocking the Arizona AG from pursuing 20 misdemeanor charges over election and sports contracts — a win that Kalshi had cited as its only federal court PI victory of 2026. The Ninth Circuit ruling is now controlling precedent in Arizona. Arizona AG Kris Mayes posted on August 28 that her office is reviewing the opinion and examining its effect on the Arizona proceedings. If the Ninth Circuit's holding — that sports contracts are not swaps and are subject to state regulation — undermines the legal basis for the May Arizona PI, Mayes could move to vacate the injunction and resume prosecution. The Arizona case was one of three grounds on which Kalshi had argued CFTC preemption would succeed; the Ninth Circuit has now rejected that argument in the same circuit.
The NFL regular season opens September 4 — one week after the Ninth Circuit ruling. Prediction market analysts estimate September football-related volume above $4 billion across platforms. Kalshi enters the season with GeoComply geofencing in Michigan and Nevada (operational since August 12), Washington state geofencing due September 2, and now a Ninth Circuit ruling that could embolden California and other western states to act. California has the largest US sports fan base and no legal sports betting, meaning Kalshi's California market — unrestricted since the platform's US launch — is now operating under a new legal risk profile. Whether California AG Rob Bonta moves against Kalshi before or during NFL season, and whether the CFTC issues an emergency order to block any such action as it did for New York, Michigan, and other states, will be among the most closely watched developments of the coming weeks. The Supreme Court, when it eventually takes the case, will be resolving a question with NFL-season trading volume running at a rate that makes the outcome commercially decisive for every platform.
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