Ninth Circuit lets Nevada enforce gambling laws against Kalshi sports contracts

A federal appeals court on Friday said Nevada can enforce its gambling laws against KalshiEX’s sports event contracts, a setback for Kalshi, which had argued federal commodities law shields it from state gaming rules. The Ninth Circuit affirmed the dissolution of a preliminary injunction in Kalshi’s favour and said the company had not shown that the Commodity Exchange Act preempts Nevada’s regulations as applied to those contracts.

In KalshiEX, LLC v. Assad, the court said the contracts were sports bets. It also said the district court did not abuse its discretion in dissolving the injunction, and it sent the election-contract issues back for further consideration.

The dispute began after the Nevada Gaming Control Board sent Kalshi a cease-and-desist letter saying it was violating state statutes and gaming regulations. Kalshi then sought an injunction, arguing that it was not a sports betting platform but a designated contract market offering legal sports event contracts under the CEA. The panel rejected the argument that the CFTC has exclusive authority here, and it also rejected claims of field preemption, obstacle preemption and impossibility.

The opinion said the CEA’s express preemption provision protects swaps traded or executed on a designated contract market, but that did not help Kalshi because its sports event contracts were not swaps. It also pointed to a CFTC regulation, 17 C.F.R. § 40.11(a), which bars swaps tied to gaming. Judge Kenneth Lee concurred, saying he largely agreed with the majority but thought a statutory provision appeared to leave the commission some discretion over gaming contracts, though he said the point did not need to be decided because the regulation already bars them.

As reported earlier this month, federal judges in Utah and Connecticut had already let those states keep pressing similar challenges. The Ninth Circuit’s ruling widens the split with the Third Circuit, which earlier this year sided with Kalshi on sports-related event contracts. Robinhood said it plans to appeal, and Nevada’s attorney general’s office called the outcome a major victory. Shares of DraftKings rose 7% and Flutter Entertainment climbed more than 6% after the ruling.