Ninth Circuit win for Nevada over Kalshi sets up potential Supreme Court showdown

The Ninth Circuit Court of Appeals delivered a win for Nevada’s regulated sports betting industry Friday when a three-judge panel ruled that sports bets accepted by Kalshi are likely not swaps as determined by the Commodity Exchange Act.  

The court rejected the arguments of prediction markets Kalshi, Crypto.com, and Robinhood, which asserted that federal law preempts state law.

Judge Ryan Nelson wrote that given “its broadest reading, the definition of a ‘swap’… might cover the sports event contracts here and thus preempt Nevada law. But that broad reading is not the best textual reading in context, does not square with the statutory scheme, does not have a limiting principle, and would raise concerns under the major-questions doctrine.” 

The Major Questions Doctrine says that a federal agency must have explicit direction from Congress to decide an issue that is of major economic or political importance.

In April, the Third Circuit Court of Appeals ruled that New Jersey could not prohibit prediction markets from taking bets in that state. The conflicting rulings now set up a legal battle that is likely to land before the U.S. Supreme Court. 

“We are pleased with the Ninth Circuit’s ruling today in favor of Nevada. This completely vindicates what we have been saying all along,” Nevada Gaming Control Board Chairman Mike Dreitzer said in a news release. “This is sports betting and needs to be properly regulated by the state.”

Gov. Joe Lombardo commended Dreitzer and the GCB “for their diligent work to uphold Nevada’s longstanding regulatory standards, safeguard the integrity of our gaming industry, and ensure the public can continue to have confidence in its oversight.”

In recent months, the GCB has attempted to enforce injunctions that prohibit Kalshi and other platforms from accepting bets. 

The GCB was joined in the litigation by the Nevada Resort Association, which represents the state’s casinos. The NRA did not immediately respond to a request for comment