9th Cir. Ruling on Sports-Prediction Contracts Creates Circuit Split
The Ninth Circuit held that sports-related event contracts are not federally regulated swaps, clearing the way for state gaming laws and directly conflicting with a recent Third Circuit decision.
The Ninth Circuit ruled in KalshiEX, LLC v. Assad that sports event prediction contracts are not "swaps" under the Commodity Exchange Act (CEA), exposing them to state-level gaming regulation. The decision allows Nevada to apply its gaming laws to operator Kalshi and rejects the argument that the products fall under the exclusive jurisdiction of the U.S. Commodity Futures Trading Commission (CFTC), which had supported Kalshi as an amicus.
This ruling matters because it creates a direct conflict with an April 2026 Third Circuit decision that found such contracts were indeed federally regulated swaps preempting state law. The split introduces significant legal uncertainty for the fast-growing prediction-market industry, which now faces a fractured regulatory landscape. For clients in this sector, the key question is whether they will be governed by a single federal regulator or a complex patchwork of state gaming laws.
The circuit split makes Supreme Court review substantially more likely. Market participants should monitor whether New Jersey seeks certiorari in the Third Circuit case, as the new Ninth Circuit opinion would strengthen its petition. Meanwhile, operators face conflicting precedents and heightened risk.