Two years ago Kalshi told a federal appeals court that a contract on the outcome of a sporting event was the textbook example of the thing federal law would not let it list. On Friday, a different appeals court read that line back to it.
The Ninth Circuit ruled 3-0 that Kalshi's sports contracts are probably not financial instruments under federal law at all. They are bets. Which means Nevada's gaming regulators are free to enforce state gambling law against the largest prediction market in the country.
Back up to 2023. The CFTC had blocked Kalshi from listing contracts on which party would control Congress, on the theory that wagering on elections was gaming. Kalshi sued and won on a narrow argument: gaming means games, and elections are not games. To show the court what a real gaming contract looked like, its lawyers offered the classic example, "a contract on the outcome of a sporting event." In January 2025, Kalshi started listing contracts on the outcome of sporting events. By the end of that year, according to Friday's opinion, sports made up more than 90 percent of its trades and 95 percent of its revenue.
So the panel went and found the old brief. It quoted the sentence, said it agreed, and observed that the shift in Kalshi's argument tracked the shift in its business.
It is a narrower win for the states than it looks. Almost all of it rests on a single CFTC regulation, 40.11, which bars exchanges from listing gaming contracts — and which the agency has formally proposed rewriting. Judge Lee's concurrence says as much: the rule is still on the books, so it decides this appeal. The CFTC itself filed in support of Kalshi's reading of it. Thirty-nine states and the District of Columbia filed against. And in April the Third Circuit read the identical statute and came out the other way, the sort of conflict Columbia law professor Joshua Mitts told CNBC ends up at the Supreme Court.
Buried in a footnote, and repeated in the opinion's final line, is the part that matters most to the business Kalshi started with. The panel sent Nevada's challenge to the election contracts back down to the district court, noting that those contracts are illegal under Nevada law and a fraction of Kalshi's business now. They are the contracts it went to court for in the first place.
Kalshi won the right to trade elections by telling a court exactly where the line between a market and a bet was. The court has now put the company on the far side of the line it drew, and sent the elections back down to be measured against it.
The court has now put the company on the far side of the line it drew, and sent the elections back down to be measured against it.
