Nevada's preemption argument hardens as Kalshi delay bid fails

Nicole Saharsky filed her letter with the Ninth Circuit on September 25. It was not long. It did not need to be.

Kalshi had asked the court to hold its petition for rehearing en banc — or grant it outright — on the grounds that the CFTC intends to revise 17 CFR 40.11 within two months. The argument was straightforward: wait for the agency to rewrite the rule, because the rewritten rule might change the legal landscape. Saharsky, representing Nevada and retained through Mayer Brown, spent most of her filing explaining why that argument fails on its own terms before it fails on the law.

The court already knew about the CFTC's revision plans when it issued its August decision. The three-judge panel ruled 3-0 that the Commodity Exchange Act likely does not preempt Nevada gaming law. It reached that conclusion through statutory interpretation — text, context, and the purposes of the CEA — not by reading 17 CFR 40.11 as the load-bearing wall Kalshi now treats it as. Saharsky's letter points out that the panel cited that section only to reject one subsidiary argument, not to anchor its holding. A revised rule cannot unwrite a statutory interpretation.

This is the part of the dispute that the regulatory attention has obscured. The CFTC has sent two proposed rules to the White House Office of Information and Regulatory Affairs: one that would define swaps to include event contracts, another that would carve out casino-style gambling products. The agency is moving, visibly and with apparent urgency. But what the Ninth Circuit held is that sports-event contracts are not swaps under the statute as Congress wrote it. Agency rulemaking operates beneath that finding, not above it. The CFTC can redefine terms in its own regulations. It cannot reclassify what Congress meant when it wrote the CEA.

I have seen this pattern before — not in prediction markets, but in derivatives disputes where a regulator's pending guidance was offered as reason to pause litigation. Courts rarely accept it. The reason is structural: if a pending rule could stay any adverse ruling, agencies would always have a rule pending. The Ninth Circuit panel understood this. Saharsky's letter simply makes it explicit for the en banc petition.

What Saharsky adds, bluntly, is that Kalshi's delay request reads as an attempt to extend unlawful operations rather than a genuine legal argument about timing. That framing, if the panel accepts it, affects more than this petition. It shapes how the court reads Kalshi's subsequent filings.

The Sixth Circuit has already allowed Ohio and Tennessee to enforce their gambling laws. The Ninth Circuit's no-swaps ruling holds. The CFTC's rulemaking is real, but it is traveling through OIRA review before it reaches publication, and publication is not the same as legal effect. Whether a revised 17 CFR 40.11 could survive a Supremacy Clause challenge — given what the Ninth Circuit has already said about the statute it purports to implement — is the question the agency's two proposed rules have not answered.