Ninth Circuit denies Kalshi rehearing in Nevada sports contracts case

Three days after the Second Circuit refused to block New York and Connecticut from enforcing their gambling laws against Kalshi's sports event contracts, the Ninth Circuit closed another door. On Wednesday the appeals court rejected Kalshi's petition for rehearing in the Nevada case, unanimously, with no judge even requesting a vote on full-court consideration. That last detail matters. A single judge asking for a vote would have kept the possibility alive. None did.

The Nevada ruling it leaves standing held that sports event contracts on Kalshi do not qualify as swaps under the Commodity Exchange Act, which means federal derivatives regulation does not shield them from state gambling law. That is a narrow holding about a specific contract type, but its implications spread across the entire state enforcement map. If the contracts are not swaps, the preemption argument that Kalshi has used to push states back dissolves, and what remains is a company holding a CFTC designation while facing enforcement from regulators who now have appellate cover to act.

Paul Clement's 78-page petition argued that the ruling exposed Kalshi to civil and criminal liability despite full compliance with its federal regulator. The Ninth Circuit was not moved. Kalshi has ninety days to petition the Supreme Court.

Whether the Court takes it is the genuinely open question, and I think the conventional read underestimates how live that possibility is. There is a real circuit split developing. The Second, Ninth, and Third Circuits are all touching different pieces of the same underlying question — whether Congress intended the CFTC's exclusive jurisdiction to mean anything when states decide they disagree. That is the kind of jurisdictional mess the Supreme Court tends to find clarifying. I would not price Supreme Court cert as a long shot, and I suspect the market treating it that way is making an error.

Arkansas filed its own suit the same day the Ninth Circuit ruled, becoming the seventh state to take formal action. Its theory is different from Nevada's — it goes at Kalshi under the state's deceptive trade practices statute, asks for gambling taxes going back to whenever Arkansas residents first traded on the platform, and leans heavily on Kalshi's own consumer protection features as evidence of what it really is. The complaint notes that traders aged eighteen to twenty moved an estimated $5.4 billion on Kalshi through late August of this year. Arkansas allows sports wagering only for people twenty-one and older. Kalshi accepts users from eighteen.

The age argument is the sharpest edge in the Arkansas filing. Kalshi added monitoring and parent-linked accounts for the eighteen-to-twenty cohort, which the state reads not as compliance but as confirmation. If you are building parental controls into a financial derivatives platform, the state is asking you to explain why.

What I keep returning to is the structure of what is happening across all these cases simultaneously. Each state is picking a different legal instrument — criminal charges in Arizona and Utah, tax liability in Arkansas, consumer protection in New York, licensing fees in Nevada. Kalshi cannot win them all in different courts on different theories. Even if the Supreme Court ultimately resolves the swap question cleanly in Kalshi's favor, it will not resolve it before several of these cases produce significant costs. The $40 billion valuation the company reached in its latest funding round reflects a bet on the federal preemption argument holding. The Ninth Circuit just made that bet more expensive to hold.