A federal appeals court handed Kalshi a major legal defeat on Aug. 28, a ruling that could send the legality of stock-market-style sports gambling under federal law to the Supreme Court next year.
In a 3-0 ruling on the case, the federal appeals court said Kalshi’s so-called sports-event contracts are effectively sports bets and that federal commodities law likely does not bar Nevada from regulating them.
All three judges that ruled today against Kalshi were appointed by President Donald Trump.
Nevada Continues Winning
The ruling is the latest development in a fierce legal battle between the epicenter of the U.S. casino gambling industry and Kalshi, the leading prediction market by betting activity.
The U.S. Court of Appeals for the Ninth Circuit affirmed a lower court’s decision dissolving a preliminary injunction that had prevented Nevada gaming regulators from enforcing state gambling laws against Kalshi’s sports contracts.
Kalshi has argued that its event contracts are federally regulated financial derivatives under the Commodity Exchange Act and therefore fall under the exclusive jurisdiction of the Commodity Futures Trading Commission.
The Ninth Circuit rejected that argument as it applies to sports. Kalshi takes bets on many other real-world events that are not part of this ruling.
A Tough Day for Kalshi
The court used blunt language in describing Kalshi’s products.
“Everyone, including Kalshi, knows it when they see it,” the opinion states, concluding that “the substance of the sports event contracts offered on Kalshi’s DCM is sports gambling, regardless of whether Kalshi calls them swaps.”
Kalshi’s platform is similar to house-banked sportsbooks like DraftKings and FanDuel. Its products include point spreads, player props, and parlays. The court noted that more than 90% of Kalshi’s 2025 trades were in sports, while sports trading generated 95% of its revenue.
Kalshi, based in New York City, reportedly has been in talks to raise money at a valuation of around $40 billion. It reportedly is also considering an IPO next year, but legal losses could derail those plans.
Case Background
In March 2025, Nevada handed Kalshi a cease-and-desist letter, alleging that the company was a form of illegal gambling. Kalshi then fired back in a lawsuit by arguing Nevada’s gambling laws were preempted by federal law covering its product.
The Ninth Circuit concluded that Kalshi had not shown a likelihood of succeeding on that claim, finding that its sports contracts are not “swaps” and therefore do not get the federal preemption Kalshi asserted.
The ruling conflicts with the Third Circuit, which previously sided with Kalshi on the federal preemption question, sharpening a split over the legal status of prediction-market sports betting.
The Ninth Circuit did not resolve the status of Kalshi’s election markets. Instead, it sent that portion of the case back to the district court to determine the status of those markets.
