The Ninth Circuit Says Kalshi's Sports Contracts Are Bets, Not Swaps. The Third Circuit Said Otherwise.

Two federal appeals courts have read the same clause of the Commodity Exchange Act and split on who regulates a sports event contract: the CFTC alone, or the state where the trade is placed.

Case: KalshiEX, LLC v. Assad, No. 25-7516 (9th Cir.); D.C. No. 2:25-cv-00575-APG-BNW

Opinion: filed 28 August 2026, published; Nelson, joined by Bade; Lee concurring

Contrary holding: KalshiEX, LLC v. Flaherty, 172 F.4th 220 (3d Cir.), 2–1, 6 April 2026

Statute: CEA section 2(a)(1)(A); swap definition section 1a(47)(A)(ii); Special Rule section 7a-2(c)(5)(C)

Regulation: 17 C.F.R. section 40.11(a), prohibition; section 40.11(c), 90-day review

Kalshi DCM status: designated 3 November 2020, CFTC register record 42993

CFTC register: https://www.cftc.gov/IndustryOversight/IndustryFilings/TradingOrganizations/42993

The Ninth Circuit has affirmed the dissolution of KalshiEX's injunction against Nevada's Gaming Control Board, holding it had not shown the Commodity Exchange Act likely preempts Nevada gaming law as applied to its sports event contracts. The fight is over which regulator owns it.

One word decides that. Section 2 of the CEA gives the CFTC exclusive jurisdiction over swaps "traded or executed on" a designated contract market. Kalshi is a DCM and nobody disputed the contracts trade there, so Nevada's authority survived only if a sports event contract is not a swap. Judge Nelson held it is not: "associated with" demands an event inherently associated with a financial consequence, not one carrying "some potential downstream financial consequence" — otherwise the definition would be "so broad as to be meaningless." Sports made up over 90 per cent of Kalshi's 2025 trades and 95 per cent of revenue, the opinion records.

Philadelphia read the same clause the other way. In Flaherty, Judge David J. Porter's opinion for the court, joined by Chief Judge Michael A. Chagares over Judge Roth's dissent, held the outcome of a sports event "certainly can be associated with a potential financial, economic, or commercial consequence," given sponsors, broadcasters and franchises. An association was all the opinion required: "The analysis need not go further." The contracts were swaps, so exclusive jurisdiction followed, and the opinion defined the preempted field as DCM trading rather than gambling. Nelson accepted that the CEA "preempts state law purporting to regulate futures trading," but Flaherty's field holding "depended on" its swap finding — so one contested definition drags the rest behind it.

The second lock is regulatory. The rule already on the books bars a registered entity from listing a contract on an excluded commodity that "involves, relates to, or references" terrorism, assassination, war or gaming. Kalshi self-certified in January 2025 under the same route Polymarket US used for its crypto price contracts; the CFTC never opened the 90-day review the rule permits nor issued an approving order. That power "was never used," Nelson wrote, so the prohibition "remains in effect".

The Third Circuit "essentially disregarded" that rule, the panel said, noting only that the CFTC "has not yet acted." Lee, concurring, found the Special Rule's "may determine" phrasing gave him pause, but that the rule "bars gaming contracts" and decided the appeal. The panel found these are gaming contracts "under any reasonable interpretation," quoting Kalshi's own 2024 D.C. Circuit brief: gaming means "playing games for stakes."

A published opinion binds the nine western states the Ninth Circuit serves — Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington — plus Guam and the Northern Marianas. California, Legal Sports Report notes, has no legal sports betting market. And the reasoning attaches to the product, not the company: Polymarket US holds the same federal designation.

Nevada is not waiting. Kalshi says sports, entertainment and election contracts are blocked there; Control Board agents say they still reach the site, and regulators want a Carson City court to hold it in contempt and impose the $120,000-a-day penalty ordered earlier for failing to geofence, the Las Vegas Review-Journal reports. "This is sports betting," Chairman Mike Dreitzer said.

That proceeding asks a narrower question than the appeal does. A contempt motion is not a rehearing of whether event contracts are lawful; it asks whether an order already on the books was disobeyed, and the $120,000-a-day figure attaches to the earlier geofencing order rather than to anything the Ninth Circuit decided. The two tracks can therefore move independently: the appellate question is who may regulate the product, while the Carson City question is whether a company complied with an order it is already subject to. Neither has been answered. The Board is seeking enforcement, and a request for contempt is a request, not a finding.

Little is settled: both rulings are preliminary-injunction decisions, not merits judgments. The election contracts return to Judge Andrew P. Gordon, who never analysed whether they fit the swap definition. And the Supreme Court has taken nothing: New Jersey's attorney general petitioned a day ahead of her deadline, asking whether Dodd-Frank "preempted States from regulating sports bets that occur within their jurisdictions" when those bets are offered on CFTC-registered markets, InGame reports. For now, the answer depends on the courthouse.

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