Kalshi Loses Ninth Circuit Appeal Over Nevada Gaming Law

The US Court of Appeals for the Ninth Circuit ruled on August 28, 2026 that Kalshi's sports event contracts are likely sports bets rather than federally regulated swaps, so Nevada can enforce its gaming laws against them. It is a published opinion, so it binds the district courts of nine western states, and it undercuts the legal theory that several sweepstakes operators are betting their future on.

The case is KalshiEX, LLC v. Assad, No. 25-7516, decided by a three-judge panel of the US Court of Appeals for the Ninth Circuit. Judge Ryan D. Nelson wrote for the court, joined by Judges Bridget S. Bade and Kenneth K. Lee, who filed a separate concurrence. It is a published opinion, which means it binds every district court in the circuit.

Kalshi is not a sweepstakes casino and this ruling does not mention sweepstakes once. It matters here for a narrower reason: the argument Kalshi lost is the same argument the operators leaving the sweeps model are relying on to keep serving states that banned them.

What did the Ninth Circuit actually decide?

The Nevada Gaming Control Board sent Kalshi a cease-and-desist letter in March 2025, calling it an unlicensed sports pool under Nev. Rev. Stat. § 463.160(1) and § 463.245(2). Kalshi sued and won an injunction, then lost it when the district court dissolved the order. The panel has now affirmed that dissolution as to sports contracts.

The reasoning is blunt. Kalshi argued its contracts are "swaps" under the Commodity Exchange Act, giving the CFTC exclusive jurisdiction and preempting state law. The court disagreed:

"The crucial context that leads us to resist the broadest possible reading is that Kalshi has a gambling problem. Kalshi describes and markets its sports event contracts offered on its DCM as 'legal sports betting.' Yet it argues that sports bets and sports event contracts are different. But this argument strains credulity."

Reading the statute Kalshi's way, the panel said, would assume Congress was "hiding an elephant in a mousehole" by handing the CFTC authority over gambling nationwide. The opinion also records that over 90% of Kalshi's 2025 trades, and 95% of its revenue, were sports related.

Judge Lee's concurrence adds the practical point. He would leave the harder statutory question alone, he wrote, "because 17 C.F.R. § 40.11 bars gaming contracts." That regulation, not the reading of the statute, is what he says controls the outcome.

Arizona's attorney general, Kris Mayes, put out a statement the same day. "Calling a sports bet a 'swap' doesn't make it one," she said, adding that Kalshi's position "would have effectively federalized sports betting regulation nationwide."

Which states does this cover?

The Ninth Circuit's territory is the western United States, and it includes three states that banned the sweepstakes casino model outright and three more where our data shows operators pulling back.

The ruling changes nothing about sweepstakes casinos in those states directly. What it changes is whether a CFTC registration is a way around them.

Why should a sweepstakes player care?

Because the exit route has a court result now, and it went the states' way.

Over the past four months a run of sweeps operators has stopped arguing that dual-currency play is legal and started arguing that federally regulated event contracts are. In date order:

• June 11 - the company behind ReBet filed a federal futures broker application that is still pending.
• August 4 - Novig retired its sweepstakes currencies and relaunched as an exchange.
• August 12 - Fliff and Onyx Odds filed to become federal futures brokers.
• August 12 - the CFTC itself issued an advisory touching sweepstakes-style rewards on prediction-market venues.

Every one of those moves assumes federal registration outranks a state gambling law. In nine states, an appeals court has now said it likely does not - at least for sports contracts on a CFTC exchange.

None of the three pending applications has been granted. We re-read the NFA's BASIC registry today:

If you hold a balance at an operator mid-pivot, the practical advice has not changed and this ruling makes it more urgent: cash out rather than wait. Our guide to redeeming sweeps coins covers the mechanics, and Legendz and Sportzino are the sports-style sweeps books we rate that are not currently changing model.

Is the Ninth Circuit ruling final?

No, and it is worth being precise about what was decided. This was an appeal from a preliminary injunction, so the panel ruled on likelihood of success, not on the merits. The election-contract half of the case goes back to the district court.

There is also now a split between federal appeals courts. The panel's own footnote records it: the Third Circuit affirmed an injunction in Kalshi's favour in KalshiEX, LLC v. Flaherty, 172 F.4th 220 (3d Cir. 2026), and the Fourth Circuit appeal in KalshiEX LLC v. Martin, No. 25-1892, is still pending. Judge Lee's concurrence says the majority "rightfully avoids the Third Circuit's more literalist approach."

Splits like that are how cases reach the Supreme Court. Nothing about the outcome is settled.

There is a second reason to hold this loosely. Judge Lee rests the result on a regulation rather than on the statute, and he flags what that depends on: "While CFTC has proposed revising that regulation, it remains in the books and controls the outcome of this appeal." The rule doing the work here is one the federal regulator has already proposed changing. If 17 C.F.R. § 40.11 is rewritten, the reasoning at least one member of this panel relied on moves with it.

State enforcement is not waiting for any of that. Connecticut sued Kalshi on August 26, two days before this opinion landed, after its Department of Consumer Protection ordered the platform and two others to stop offering sports event contracts in December 2025. Attorney General William Tong said the contracts "are no different than sports betting and are not magically shielded by federal law." That is the same state where a Second Circuit judge refused to pause Connecticut's gambling laws for Kalshi on August 19.

Sources & documents

• KalshiEX, LLC v. Assad, No. 25-7516 (9th Cir. Aug. 28, 2026), published opinion, 50 pages, read in full
• CourtListener docket entry for the opinion
• Arizona Attorney General statement on the ruling, August 28, 2026
• Connecticut Attorney General, "Connecticut Sues Kalshi to Stop Illegal, Unlicensed Sports Betting", August 26, 2026
• NFA BASIC registry, registration histories re-read August 30, 2026 for Fliff FCM LLC (NFA ID 0580535), Onyx Markets LLC (0580601), ReBet Predictions LLC (0578950) and Onyx Predictions LLC (0576468)

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