The Ninth Circuit ruled Friday that Kalshi’s sports event contracts are not swaps under the Commodity Exchange Act, clearing the way for Nevada to enforce its gaming laws against the prediction market.

The decision turns on a single question with large commercial stakes: if the contracts are swaps, the Commodity Futures Trading Commission has exclusive jurisdiction over them and states are locked out. The Aug. 28 opinion in KalshiEX LLC v. Assad says they are not, so Nevada’s gaming regime applies. Kalshi now faces state gaming enforcement in Nevada while the identical product remains federally shielded in New Jersey, where the Third Circuit ruled the other way in April.

Outcome, Not Occurrence

The CEA defines a swap to include an agreement dependent on “the occurrence, nonoccurrence, or the extent of the occurrence of an event.” Kalshi argued its sports contracts fit, which would place them under exclusive CFTC oversight and outside Nevada’s reach.

The panel rejected that reading. Whether the Super Bowl happens is the occurrence of an event, the court said; whether a particular team wins it is the outcome of an event. Kalshi’s broad interpretation, the panel added, “knows no limiting principle because anything could be defined as an event.”

Nobody disputed that the contracts trade on a designated contract market. The court held that they are still not swaps. Judges Ryan Nelson, Bridget Bade and Kenneth Lee heard the case; Nelson wrote the opinion and Lee filed a concurrence.

The Gaming Rule

The panel also leaned on 17 C.F.R. § 40.11(a), the CFTC regulation barring event contracts that involve, relate to or reference gaming. Kalshi listed the sports contracts through self-certification, the process that lets an exchange bring a product to market without prior CFTC approval. The court said that self-certification was unlawful under both the CEA’s special rule for event contracts and the regulation.

Lee agreed with the majority’s textual analysis but wrote separately to flag that the special rule “appears to give the CFTC discretion whether to ban altogether gaming contracts.” He concluded the question does not need answering now because § 40.11 currently bars them.

Two Circuits, Two Answers

The Third Circuit’s April 6 opinion in KalshiEX LLC v. Flaherty reached the opposite conclusion on the same statutory text. Its 2-1 majority, written by Judge Porter, held that sports outcomes can be “associated with a potential financial, economic, or commercial consequence” and therefore qualify as swaps. It found both field and conflict preemption and left New Jersey blocked from enforcing its gambling laws. Judge Roth dissented, arguing the presumption against preemption applies to gambling because states have traditionally regulated it.

Two federal appeals courts have now read the same definition and produced contradictory results on the same company’s product, the classic condition for Supreme Court review.

What Is Still Open

Neither ruling ends its underlying lawsuit. Both appeals concerned preliminary injunctions and whether Kalshi had shown a likelihood of success at that early stage, not a final judgment on the merits.

The Ninth Circuit’s decision covers only the sports contracts. It remanded Nevada’s challenges to Kalshi’s election contracts for the district court to reconsider under the new opinion.

Kalshi has been expanding beyond event contracts into crypto derivatives, filing to add perpetual futures on 12 altcoins days after the CFTC cleared its bitcoin contract, and moving further onchain through a partnership with oracle provider RedStone.