The Ninth Circuit sided with Nevada gaming regulators in KalshiEX’s fight over sports-event contracts, holding that the company had not shown that the Commodity Exchange Act pre-empts Nevada’s gaming laws as applied to those products. The three-judge panel affirmed in part a district court order dissolving Kalshi’s preliminary injunction and said the contracts are not swaps because they are sports bets.
In the opinion, Judge R. Nelson wrote that Kalshi’s attempt to deny that point was “disingenuous” and said that placing sports bets, even when called by another name, is still gambling. The court said the payout on the contracts depends on the performance of a sports team or player, and noted that users could place prop bets, bet a point spread, wager on a specific score or build parlays with several legs.
The panel also rejected Kalshi’s argument that because it operates as a federally regulated designated contract market, federal law overrides state law. It said Nevada was enforcing its own rules on what counts as a bet or wager, and that the Commodity Exchange Act’s scheme was not as broad as Kalshi claimed. The opinion likewise rejected field pre-emption and Kalshi’s argument that it was impossible to comply with both Nevada law and the federal statute.
The court’s reasoning turned in part on post-Dodd-Frank rules. It said the CFTC has exclusive jurisdiction over swaps, including certain event-linked agreements, but also pointed to a CFTC regulation that bars contracts involving gaming, and concluded Kalshi’s sports-event contracts likely fall within that prohibition. The panel said the company’s self-certification and listing of the contracts was unlawful under that rule.
The opinion also said Nevada’s gaming regulator sent Kalshi a cease-and-desist letter after the volume of activity on the company’s sports-betting platform ballooned. Kalshi has described itself as “the first app for legal sports betting in all 50 states.”
The court did not address election contracts, leaving that issue to the district court. In a concurrence, Judge Lee said one statutory provision gave him pause because the Special Rule appears to give the CFTC discretion over whether to ban gaming contracts altogether, but he said the question did not need to be resolved now because the regulation currently bars them.
