- Details
- By Chez Oxendine
- Gaming
A federal appeals court has cleared Nevada to enforce its gambling laws against KalshiEX, handing tribes and state regulators a legal victory in their efforts to prevent federally regulated prediction markets from operating outside established gaming laws.
In a unanimous decision issued Aug. 28, the U.S. Court of Appeals for the Ninth Circuit ruled that Kalshi is unlikely to prove that the federal Commodity Exchange Act shields its sports prediction contracts from state regulation. A coalition of 24 federally recognized tribes and tribal organizations had filed a friend-of-the-court brief urging the Ninth Circuit to reject Kalshi’s argument.
The tribal coalition argued that Kalshi’s interpretation of federal law would nullify tribal-state gaming compacts and regulatory systems, divert gaming revenue from tribal governments and diminish tribal authority to regulate gaming on Indian lands.
James Siva, vice chairman of the Morongo Band of Mission Indians and chairman of the California Nations Indian Gaming Association, told Tribal Business News that the ruling shows that “the arguments we’re making are being heard and understood.”
CNIGA signed onto briefs in several prediction market cases and helped recruit tribes to participate, coordinate legal strategy and explain the tribal stakes to courts and the public, Siva said.
The Ninth Circuit upheld part of a lower court’s order dissolving a preliminary injunction that had blocked Nevada regulators from pursuing enforcement against Kalshi’s sports‑related contracts. The three‑judge panel found that Kalshi’s offerings — including wagers on game outcomes, draft positions and Super Bowl prop bets — are likely not “swaps” under federal law, even though they are traded on a federally regulated financial market.
The decision allows Nevada to pursue enforcement while Kalshi’s lawsuit continues. The court sent a separate dispute over the company’s election contracts back to the lower court for further consideration.
The court said the Commodity Exchange Act’s definition of a swap covers contracts tied to whether an event occurs and has potential financial, economic or commercial consequences. Kalshi’s sports contracts, the panel wrote, turn on the outcome of a game, not whether the game takes place.
“Equating an event with an outcome or result is an archaic use of the word ‘event,’ not the ordinary meaning,” the judges wrote, quoting an earlier ruling this year in a similar case involving Crypto.com. Accepting Kalshi’s position “would hide an elephant in a mousehole” by sweeping nearly all sports wagering under the exclusive control of the Commodity Futures Trading Commission, despite states’ long-standing role in regulating gambling.
The ruling also emphasized that an existing CFTC regulation bars platforms such as Kalshi from listing contracts related to gaming. Because Kalshi’s sports products fall within that ban, the court said the company cannot use federal law to block Nevada’s enforcement actions.
Siva said the contracts are “purely sports betting just under the guise of a financial trading tool.”
“The more people actually look at them and the more people actually understand what they’re offering, it’s plain to see,” he said.
Siva said the decision gives tribes momentum but not certainty, and predicted that the dispute is likely headed to the U.S. Supreme Court. He said tribal advocates remain concerned about the federal government’s approach to event contracts, adding that he believes tribes are on solid legal ground and prepared for a long fight.
“This battle is far from done,” Siva said. “We’ve got to keep pushing forward."
A lawyer familiar with prediction‑market litigation said the Ninth Circuit ruling is “a canary in the coal mine for how the Supreme Court might treat this case,” and predicted that the dispute is almost certain to reach the high court because it threatens the core business model of platforms that rely heavily on sports‑based contracts.
The lawyer, who is not involved in the lawsuit and spoke on background to Tribal Business News, said the stakes are unusually high, describing the central question as “whether the CEA allows the CFTC to effectively circumvent the country’s patchwork gambling laws by offering an identical product under a different name.”
The lawyer added that he does not expect that argument to fare well at the Supreme Court.
Brian Edwards contributed reporting.
