Saharsky wins even if the CFTC gets what it wants

Nicole Saharsky filed a letter with the Ninth Circuit on September 25 that did something most legal filings fail to do: it closed a door before the other side could walk through it.

Kalshi had argued that the CFTC's plan to revise its regulatory rules — expected within two months, per the agency's own statement — was reason enough for the court to pause its rehearing petition. The logic was straightforward. If the regulator rewrites the definition of a swap to explicitly include event contracts, the statutory question the Ninth Circuit ruled on in August might look different. Let the rule land, then revisit.

Saharsky, representing Nevada, answered this in two moves. First, she pointed out that the court already knew about the CFTC's revision plans when it issued its August ruling and ruled anyway. The judges did not treat pending rulemaking as a reason to wait then. There is no reason to treat a restatement of that same intent as grounds to wait now. Second, and this is the part that matters more: the Ninth Circuit's no-swaps ruling was grounded in the text of the Commodity Exchange Act itself, not in what the CFTC happened to have written in Section 40.11. An agency can revise its own rule. It cannot revise a statute.

That distinction is doing significant work in this litigation, and I think the market has not fully priced how durable it is. The CFTC has now submitted two proposed rules to the White House Office of Information and Regulatory Affairs — one that would further define swaps to include event contracts, the second that would exclude what it calls "casino-style gambling products." The regulatory intent is clear. But intent routed through an agency's rulemaking authority still has to survive contact with a statutory text that three Ninth Circuit judges read and found unambiguous. The same argument that failed in the Sixth Circuit last week, where Ohio and Tennessee were permitted to enforce their own gambling laws against Kalshi, is failing at the appellate level because courts keep returning to what Congress wrote, not what the CFTC prefers.

I have seen this shape before in other regulatory contexts — an agency moves to regularise what it considers its own jurisdiction, markets price the rulemaking as the resolution, and then a court reminds everyone that agencies derive their authority from statutes, not the other way around. The rulemaking does not moot the statutory question. It produces a new rule that will face its own challenge under the same statute.

Saharsky's sharpest line was probably this: Kalshi's delay bid is an attempt to extend unlawful operations for as long as possible. That framing, if it holds at the circuit level, forecloses the procedural runway Kalshi was counting on. The Illinois partial victory last week — where a federal judge found sports-event contracts are likely swaps — keeps the federal preemption argument technically alive, but it now sits against a pattern of appellate losses that no rulemaking timetable reverses.