Nevada attorney tells Ninth Circuit CFTC rulemaking cannot save Kalshi

Nicole Saharsky filed a letter with the Ninth Circuit on September 25 making a point that tends to get lost when regulatory rulemaking becomes the story: a proposed rule does not change the law that already exists.

Kalshi had asked the court to hold its petition for rehearing en banc until the CFTC publishes its revised rules under 17 CFR 40.11, arguing that the agency's stated intent to rewrite the definition of a swap within two months warranted a pause. Saharsky, representing Nevada, said the court was already aware of that intent when it issued its decision. The CFTC's filing with the White House Office of Information and Regulatory Affairs, she wrote, does no more than indicate timing.

The structural point in her brief is worth sitting with. The Ninth Circuit's August ruling — unanimous, three judges — held that sports event contracts are not swaps based on the text, context, and purposes of the Commodity Exchange Act. The court cited Section 40.11(a) as one basis for rejecting one of Kalshi's arguments, not as the load-bearing wall of its reasoning. Saharsky's position is that even if the CFTC rewrites that section tomorrow, the statutory analysis survives. The agency can revise its own regulations. It cannot revise the statute the court just interpreted.

This is where the CFTC's two proposed rules — one broadening the swap definition to include event contracts, one carving out casino-style gaming products — reveal their real function. They are not litigation tools. They are long-horizon plays designed to establish a jurisdictional architecture that might survive the next circuit challenge, or a Supreme Court review, or a differently constituted appellate panel three years from now. The proposals' submission to the Office of Information and Regulatory Affairs signals that the agency wants those rules on the books regardless of what happens in the Ninth Circuit this fall.

Kalshi, meanwhile, is accumulating adverse rulings faster than rulemaking cycles move. The Ninth Circuit ruled against it twice. The Sixth Circuit ruled for Tennessee and Ohio. The company has argued preemption, statutory authority, and special rules — and each of those arguments has been rejected on the merits by at least one panel. Saharsky put the point plainly: this is a delay strategy, not a legal one.

I have watched parties in derivative enforcement proceedings use pending rulemaking as a time-buying argument more than once. It occasionally works when the rule in question is central to the legal question before the court. When the court has already said the statute speaks for itself, it does not work. The argument requires the court to believe that an agency's future administrative action can retroactively validate conduct the statute prohibited — a theory that appellate courts have shown no appetite for in recent years.

Prediction markets tracking the en banc rehearing exist, and they are being watched. The legal standard the court will apply is whether the panel decision conflicts with Supreme Court precedent or produces an outcome of exceptional importance warranting full-court consideration. Saharsky's letter argues neither condition is present.