Circuit split on Kalshi sports contracts points toward Supreme Court

Dani Lever's statement on August 28 contained one phrase that deserved more attention than it received: "the CFTC is working to clarify those regulations." That is not the language of a company that just won. It is the language of a company that has run out of courts to win in.

The Ninth Circuit's unanimous ruling that Nevada can regulate Kalshi's sports contracts as gambling — not as federally protected swaps — was the expected outcome after the district court below reached the same conclusion. What changed on August 28 was arithmetic. The Third Circuit held in April that New Jersey could not apply its gaming laws to Kalshi's platform. The Ninth Circuit has now held the opposite. Two federal appeals courts, irreconcilable, covering territory that includes more than half the American population.

A circuit split of this kind is one of the clearest signals the Supreme Court uses to decide whether to grant certiorari. It does not guarantee review — the Court takes what it chooses — but it removes the procedural awkwardness of asking nine justices to resolve a question that the lower courts have not yet disagreed about. The lower courts have now disagreed, loudly, on exactly the question that determines whether Kalshi's business model is legal in any state that declines to issue it a gaming license.

The Ninth Circuit panel's description of Kalshi's marketing as "disingenuous" is worth holding separately from the legal holding. Courts do not use that word carelessly. The panel was making a record — one that a future court, including a Supreme Court, would read. Kalshi argued that its contracts were swaps while simultaneously marketing them in language that resembled sportsbook advertising. The panel found that gap disqualifying. That finding does not disappear on further review; it follows the case upward.

The contempt proceedings in Nevada, with a $120,000 daily penalty already ordered, represent a different kind of pressure. Kalshi's own spokeswoman acknowledged the company is blocked from offering sports, entertainment, and election contracts in Nevada. Nevada regulators said their agents could still access the site from within the state. That discrepancy is either a technical failure on Kalshi's part or an enforcement dispute about what "blocked" means — either way, it is the kind of factual record that contempt proceedings are designed to resolve, and the Ninth Circuit ruling removes Kalshi's strongest procedural defense against them.

The consensus read on this ruling is that it is a blow to Kalshi but not fatal — that the Supreme Court will eventually resolve the circuit split in the company's favor, given the current administration's posture toward federal regulatory primacy. That read is plausible. It is also doing a great deal of work for the company in the interim.

The CFTC's rulemaking process is not instantaneous. The Supreme Court's certiorari calendar does not run on Kalshi's schedule. And state enforcement actions — contempt proceedings, daily penalties, attorney general pressure across more than forty states — accumulate in the gap between now and whatever resolution eventually arrives. Markets tracking Kalshi's long-term viability are pricing the endpoint. The nearer-term question is how much operating capacity the company retains while getting there, and the Ninth Circuit just made that question harder to answer in Kalshi's favor.