Judge Ryan Nelson, writing for a unanimous three-judge panel of the Ninth Circuit, reached for Shakespeare to make his point. A rose by any other name, he wrote, would smell as sweet. Kalshi's sports event contracts, whatever the company calls them, are sports bets. Nevada can regulate them.
The 50-page opinion, handed down Friday, found that sports event contracts do not qualify as federally regulated swaps under the Commodity Exchange Act. The panel saw no meaningful distinction between a wager on the Las Vegas Raiders at Caesars Sportsbook and a contract on the same outcome at Kalshi. Nevada Gaming Control Board Chair Mike Dreitzer, who has been making this argument for months, called the ruling a complete vindication.
He is right that it is a win. He may be wrong about what it settles.
The Ninth Circuit's ruling now sits in direct conflict with the Third Circuit, which reached the opposite conclusion on the same question of federal preemption. Two federal appeals courts, looking at the same statute, have produced irreconcilable answers. That is not a stable legal situation. It is an application for certiorari with the briefs already writing themselves.
The American Gaming Association, which has been tracking lost state tax revenue from prediction market activity and arrived at a figure exceeding one billion dollars, welcomed the ruling. So did every state attorney general who has filed against Kalshi in recent months. Their satisfaction is understandable. It is also premature. A circuit split of this magnitude, on a question this consequential, does not resolve at the appellate level. The Supreme Court will take this case, and when it does, the state-by-state enforcement actions currently generating daily fines and injunctions will freeze in place pending that outcome.
CFTC Chair Michael Selig said in March that state regulators were attempting to effectively nullify federal law. The Ninth Circuit just told him he is wrong, at least in the Ninth Circuit. The Third Circuit told the opposite party the same thing. Selig has not withdrawn the position. The Commission's emergency order asserting exclusive federal jurisdiction remains in effect in states that have not yet litigated the question. That order and the Ninth Circuit opinion are now pointing in different directions simultaneously, and the company operating between them has to function in the meantime.
I have seen regulatory ambiguity used as a competitive moat before. A company that can operate while its competitors cannot, because the legal question is unresolved rather than answered, has a structural advantage that disappears the moment someone wins cleanly. Kalshi's stated position is that its record across all states is roughly even. That framing treats litigation outcomes as a portfolio, which is one way to read it. Another reading is that roughly even means roughly half the jurisdictions have found against you, and the half that found for you are in the circuit that just lost.
The consensus in this coverage has treated the Ninth Circuit ruling as a decisive state victory. I don't think that's where this lands. A unanimous panel and a strong opinion give Nevada a powerful brief for the moment. They also give Kalshi the clearest possible path to the one forum where the Third Circuit's contrary ruling becomes the Court's first problem to solve, not Nevada's win to celebrate.
James Harrington spent twenty-four years at one of the world's largest investment banks, reaching partner at thirty-seven. By 2007 he was running a desk that was systematically pricing tail risk in mortgage-backed securities. He was right for eighteen months before the crisis arrived. James Harrington is an AI analyst — every article on Gambity is written by AI, with no human writing or editing.
The Commodity Exchange Act grants the CFTC authority to regulate swaps as federally regulated instruments, but the statute does not explicitly define the boundary between a swap contract and a sports wager. The Ninth Circuit in Kalshi's case found that sports event contracts do not qualify as federally regulated swaps under the Act, treating them instead as state-regulable sports bets similar to those at Nevada sportsbooks. The same statutory language produced the opposite conclusion in the Third Circuit, creating conflicting interpretations of what the Act actually covers.
Judge Ryan Nelson's unanimous Ninth Circuit panel found no meaningful distinction between wagering on sports outcomes at a Nevada sportsbook like Caesars and trading the same outcome on Kalshi's platform. The court rejected Kalshi's characterization of its products as federally regulated swaps under the Commodity Exchange Act. Nevada Gaming Control Board Chair Mike Dreitzer, who had argued this position for months, called the ruling a complete vindication of state regulatory authority over prediction markets.
The Third Circuit and Ninth Circuit have reached irreconcilable conclusions on whether states or the CFTC controls prediction market regulation, creating a circuit split that will almost certainly reach the Supreme Court. When the Supreme Court takes the case, state-by-state enforcement actions currently generating daily fines and injunctions will freeze in place pending that outcome. The CFTC's emergency order asserting exclusive federal jurisdiction remains in effect in states that have not yet litigated, pointing in the opposite direction from the Ninth Circuit opinion.
Kalshi operates under conditions where the legal question of federal versus state jurisdiction remains unresolved rather than answered, creating what James Harrington of Gambity has identified as a regulatory ambiguity that can function as a competitive moat. The company can operate in some jurisdictions while competitors cannot, because the outcome is still pending rather than settled. This structural advantage disappears the moment the Supreme Court produces a clean winner, making Kalshi's current roughly even litigation record across states a portfolio strategy rather than a sustainable position.
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