Background
KalshiEX operates a Commodity Futures Trading Commission-registered designated contract market. In January 2025, it self-certified and began listing contracts tied to sporting events, including game winners, point spreads, player propositions, and parlays. Kalshi marketed itself as offering legal sports betting nationwide, and sports-related trades became the overwhelming majority of its business.
The Nevada Gaming Control Board sent Kalshi a cease-and-desist letter asserting that the company was operating an unlicensed sports pool in violation of Nevada law. Kalshi sued, arguing that its products were federally regulated event contracts and that the Commodity Exchange Act gave the CFTC exclusive authority over them. The district court initially enjoined Nevada but later dissolved the injunction after concluding that Kalshi’s sports contracts were not “swaps” covered by the CEA’s exclusive-jurisdiction provision. Kalshi appealed.
The Court’s Holding
The Ninth Circuit affirmed the dissolution of the preliminary injunction as to Kalshi’s sports-related contracts. The panel held that courts may independently determine whether a contract is a “swap” under the CEA and that Nevada did not need to bring an Administrative Procedure Act challenge because it was enforcing state law, not attacking any CFTC action or decision.
The panel concluded that Kalshi had not shown a likelihood that the CEA preempts Nevada’s gaming laws. Although the CEA expressly preempts state regulation of swaps traded or executed on a designated contract market, the court held that Kalshi’s sports contracts likely are not swaps when the statutory language is read in context. It characterized the contracts as sports bets, rejected express, conflict, and field-preemption theories, and emphasized that 17 C.F.R. § 40.11 currently prohibits designated contract markets from listing contracts involving gaming. The panel also found no abuse of discretion in the district court’s treatment of irreparable harm, the equities, and the public interest.
The court remanded for the district court to address Nevada’s challenge to Kalshi’s election contracts in the first instance because the district court had not separately determined whether those contracts fall within the CEA’s definition of a swap. Judge Lee concurred, agreeing with the result while noting that the CEA’s Special Rule may leave the CFTC some discretion concerning gaming contracts; he concluded that the court did not need to resolve that issue because the existing CFTC regulation bars gaming contracts.
Key Takeaways
- The CFTC’s exclusive jurisdiction over swaps traded on designated contract markets does not extend to every product merely because it is listed on such a market.
- At the preliminary-injunction stage, Kalshi failed to show that its sports-event contracts are swaps or that the CEA preempts Nevada’s regulation of those contracts as gambling.
- The ruling permits Nevada to enforce its gaming laws against Kalshi’s sports contracts, while leaving the treatment of Kalshi’s election contracts for the district court on remand.
Why It Matters
The decision preserves, at least at this stage of the litigation, state authority to regulate sports wagering offered through federally registered prediction markets. It also creates a circuit disagreement with the Third Circuit, which reached a different preliminary-injunction result concerning Kalshi’s sports-related contracts.
For designated contract markets, the opinion underscores that self-certification does not itself establish federal preemption or insulate a listed product from state gaming enforcement. The Ninth Circuit’s analysis also places substantial weight on the existing CFTC regulation prohibiting gaming-related contracts, even where the agency has not separately reviewed and disallowed the particular contracts at issue.