The Ninth U.S. Circuit Court of Appeals ruled on August 28, 2026, that sports-related event contracts offered by prediction market platforms like Kalshi are not "swaps" under federal commodity law but rather sports betting, which falls under state regulation. This decision affirmed a lower court's ruling against Kalshi's efforts to prevent Nevada from regulating its platform and dissolved a preliminary injunction. The court's opinion stated that the sports event contracts were not swaps because they were sports bets, directly contrasting with Kalshi's argument that the Commodity Futures Trading Commission (CFTC) has exclusive regulatory authority over its offerings.
This ruling creates a significant "circuit split" with the Third U.S. Circuit Court of Appeals, which in April ruled that all event contracts are swaps and are federally regulated by the CFTC. This divergence among federal appeals courts makes it highly probable that the Supreme Court will need to address the issue of whether state gaming regulators or the CFTC has the authority to regulate sports-related event contracts. Legal experts, such as Joshua Mitts from Columbia Law School, have indicated that such circuit splits typically lead to Supreme Court review.
While the Ninth Circuit sided with Nevada, Kalshi, through spokesperson Dani Lever, expressed continued belief that CFTC regulations, as currently written, do not prohibit sports contracts and that the CFTC is working to clarify these regulations. Kalshi intends to seek further review. The CFTC also disagreed with the Ninth Circuit's interpretation, stating that a derivative contract structured as a swap is a swap regardless of its underlying subject matter, with limited statutory exceptions. Conversely, the Nevada Gaming Control Board celebrated the decision as a vindication of its position that these are sports bets requiring state regulation.
The market reacted to the news, with shares of online sportsbooks DraftKings and Flutter Entertainment (parent company of FanDuel) seeing gains. DraftKings jumped 7% and Flutter was up over 6%, as concerns about prediction markets disrupting the sports betting industry eased following the ruling against Kalshi's sports offerings.
