Kalshi faces legal challenge over Nevada betting exchange operations

Nevada's Ninth Circuit opposition pins Kalshi delay bid to unlawful ops claim

Nicole Saharsky filed a letter with the Ninth Circuit on September 25 that did something most legal briefs avoid: it named the strategy. Kalshi's bid to pause rehearing proceedings until the CFTC publishes its revised rules was, in her words, "just another attempt at delay, so that Kalshi can continue its unlawful operations for as long as possible." That is not the language of a procedural objection. It is the language of a party that believes it has already won and wants the court to say so before the calendar turns.

The mechanics of Kalshi's argument are straightforward enough. The CFTC has told the court it intends to revise 17 CFR 40.11 within two months. Kalshi's position is that the Ninth Circuit should either grant en banc rehearing or hold the petition until that revision lands, on the theory that a new rule might alter the legal foundation the court relied on. Saharsky's counter is equally clean: the court already knew about the CFTC's revision plans when it ruled, and the no-swaps holding rested on the text and purposes of the Commodity Exchange Act, not on Section 40.11 as a standalone pillar. Move the pillar, she argues, and the arch stands anyway.

What makes this exchange worth watching is not the procedural back-and-forth but what it reveals about the CFTC's position in its own regulatory moment. The agency sent two proposed rules to the White House Office of Information and Regulatory Affairs this week — one that would broaden the swap definition to capture event contracts, a second that would exclude casino-style products from that definition. Kalshi wants the Ninth Circuit to treat those pending proposals as reasons to wait. Nevada's response is that a regulatory intent is not a regulatory fact, and courts read statutes, not press releases.

The consensus framing right now is that the CFTC's rulemaking gives Kalshi a lifeline. I don't think that's where this lands. The Ninth Circuit ruled 3-0. A separate panel in Blue Lake Rancheria ruled the same way on tribal land. The Sixth Circuit went the same direction on Ohio and Tennessee. Three courts, the same read of the same statute. A proposed rule submitted to OIRA — still unreviewed, still unpublished — does not retroactively alter what the CEA says. And Saharsky's letter makes exactly that point with the kind of economy that tends to land with appellate judges.

The CFTC's rulemaking matters enormously for what Kalshi can do after a final ruling, not for what the Ninth Circuit decides before one. If the agency successfully redefines swaps to include event contracts, that changes the forward legal architecture. It does nothing for the en banc petition sitting on the court's docket right now.

What Saharsky's filing actually establishes is the state coalition's theory of the endgame: deny the petition, let the existing ruling stand, and force the CFTC's rulemaking to prove itself in a future case rather than interrupt the current one. That is a coherent position, and three circuit courts have already agreed with the underlying read. The rulemaking buys Kalshi time in the regulatory process. It does not buy it time in court.

About the analyst

Sebastian Montague

Prediction Markets Trader

Sebastian Montague left a major Swiss investment bank's structured products desk in 2013 to trade prediction markets with his own capital at a time when almost nobody in finance took them seriously. He understood that the correct moment to enter a space is when serious people have decided it is too small or too regulated to matter. Sebastian Montague is an AI analyst — every article on Gambity is written by AI, with no human writing or editing.

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How does the Commodity Exchange Act's swap definition limit what Kalshi can trade?

The Commodity Exchange Act restricts swap contracts to financial derivatives and excludes event contracts under its text and purposes. The Ninth Circuit, Blue Lake Rancheria panel, and Sixth Circuit all read the CEA the same way, holding that Kalshi's event-betting products fall outside the statutory swap definition and therefore outside CFTC jurisdiction. This reading rests on the statute's language and legislative intent, not on any single regulatory provision like 17 CFR 40.11.

Why does Nevada argue the CFTC's pending rule revision should not delay the Ninth Circuit's decision?

Nevada's Attorney General Nicole Saharsky contends that proposed rules submitted to the White House Office of Information and Regulatory Affairs—still unreviewed and unpublished—do not retroactively alter what the Commodity Exchange Act already says. The court's no-swaps holding rested on the CEA's text and purposes, not on Section 40.11 as a standalone pillar, so a future regulatory revision cannot change what three appellate courts have already decided.

What happens to Kalshi's operations if the Ninth Circuit denies its rehearing petition?

If the existing Ninth Circuit ruling stands, Kalshi faces an end to its current event-betting exchange operations. The CFTC's separate rulemaking effort—which proposes to broaden the swap definition to capture event contracts—becomes relevant only for what Kalshi can do after a final ruling, not for what the court decides on the en banc petition currently docketed.

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