Background
Kalshi is an online prediction market where users can bet on pretty much anything: Which AI company will have a top-ranked AI model this year? How many Instacart app downloads will there be this month? Will it rain today in Newark, New Jersey?
But by allowing users to bet on events tied to sporting events—like whether the men’s outdoor record for pole vault will be broken this year—the company arguably ran afoul of state gambling laws.
In a bid to bypass the state law regimes, Kalshi is arguing in federal courts across the country that its sports-event contracts are “swaps” falling under the exclusive jurisdiction of the Commodity Futures Trading Commission (“CFTC”). If the CFTC has exclusive jurisdiction, the argument continues, then state gambling laws are preempted. For Kalshi, it is better to answer to one federal regulator (the CFTC, which in practice permits sports-event contracts by default) than to be subject to fifty state regulators (that prohibit the same by default).
A gambler in Las Vegas is a swaps trader in Philadelphia
Kalshi’s argument has divided the courts. The interactive chart below shows how courts have responded. Click a line to view overviews and key excerpts from each opinion.
Figure 1. Current through September 3, 2026. Each numbered line is a decision; it ends at the step where the court rejected Kalshi’s argument. Click a line to open the decision; click elsewhere or press Escape to close it. Excerpts are quoted from the opinions.
Most recently, on August 28, 2026, the Ninth Circuit rejected Kalshi’s argument, holding that its sports-event contracts are not “swaps” under the Commodity Exchange Act (“CEA”), and that they are therefore not subject to the exclusive jurisdiction of the CFTC. See KalshiEX LLC v. Assad, No. 25-7516 (9th Cir. Aug. 28, 2026).
The Ninth Circuit’s Assad holding is in direct conflict with the Third Circuit’s April 2026 decision in KalshiEX LLC v. Flaherty, No. 25-1922 (3d Cir. Apr. 6, 2026), crystallizing a circuit split that New Jersey has now asked the Supreme Court to resolve.
The split turns on nine words
A swap is a contract whose payment turns on an event “associated with a potential financial, economic, or commercial consequence.” 7 U.S.C. § 1a(47)(A)(ii).
The Third Circuit asked whether a sports outcome fits that description, taking the words at face value. The statute, it noted, requires only that the event “be ‘associated with a potential financial, economic, or commercial consequence,’” and “[t]he outcome of a sports event certainly can be associated with” one. The district court had identified “numerous affected stakeholders, including sponsors, advertisers, television networks, franchises, and local and national communities,” and that was enough: “The analysis need not go further.” The majority even pocketed a concession from its own dissenter, who agreed that “[a] plain reading of the Act’s text suggests that Kalshi’s sports-event contracts fit comfortably within the statutory definition.” KalshiEX LLC v. Flaherty, No. 25-1922 (3d Cir. Apr. 6, 2026).
The Ninth Circuit framed it differently. If a sports contract fits that definition, what doesn’t? “[R]eading the statute so expansively as to include any conceivable downstream economic consequence would render the definition of swap so broad as to be meaningless,” the Ninth Circuit wrote, invoking Lopez’s warning against a rationale that “lacks any real limits because, depending on the level of generality, any activity can be looked upon as commercial.” It “decline[d] to read Congress’s deliberately chosen words so broadly.” KalshiEX LLC v. Assad, No. 25-7516 (9th Cir. Aug. 28, 2026).
Winning the swap question may not be enough
The Southern District of New York assumed without deciding that the contracts qualified as swaps but held that the CEA did not preempt New York’s gambling laws. On field preemption, the court relied on the statute’s savings language and Special Rule as evidence that Congress preserved a role for state law. KalshiEX LLC v. Williams, No. 1:25-cv-08846 (S.D.N.Y. July 13, 2026). And on conflict preemption, the court reasoned that it would not be impossible for Kalshi to comply with both state and federal law. KalshiEX LLC v. Williams, No. 1:25-cv-08846 (S.D.N.Y. July 13, 2026). Utah reached summary judgment for state officials on similar grounds. KalshiEX LLC v. Cox, No. 2:26-cv-00151 (D. Utah Aug. 4, 2026).
Tribal law supplies an additional hurdle for Kalshi. The Western District of Wisconsin held that treating sports contracts as swaps would not necessarily repeal tribal authority under the Indian Gaming Regulatory Act. Courts do not ordinarily assume that Congress abrogated tribal sovereignty or impliedly repealed another federal statutory regime without a clear statement. Ho-Chunk Nation v. Kalshi Inc., No. 3:25-cv-00698 (W.D. Wis. May 11, 2026).
The regulatory escape hatch may be moving
The Ninth Circuit supplied an additional reason for its result: current Section 40.11 states that a registered entity “shall not” list a contract based on an excluded commodity that involves gaming. The court treated that direction as mandatory. KalshiEX LLC v. Assad, No. 25-7516 (9th Cir. Aug. 28, 2026).
Judge Lee’s concurrence noted a tension between that categorical regulation and the statute, which says the CFTC “may determine” that an event contract involving gaming is contrary to the public interest. KalshiEX LLC v. Assad, No. 25-7516 (9th Cir. Aug. 28, 2026).
The CFTC has proposed replacing the categorical language with a contract-review framework. Under the proposal, contracts based on final scores, tournament advancement, and aggregate statistics generally would weigh against a finding that the contracts are contrary to the public interest. Contracts involving player injuries, officiating decisions, or similarly sensitive occurrences would receive different treatment. 91 FR 35806.
The proposal is not an operative final rule. Even if finalized, it could affect the Ninth Circuit’s regulatory rationale without resolving the statutory definition of “swap” or the separate preemption dispute.
Takeaway
As things stand, federal registration is not a nationwide license to take sports bets. Until the Supreme Court or Congress says otherwise, Kalshi is a swaps exchange in the Third Circuit, a bookmaker in the Ninth, and a litigant everywhere in between.
This post is for general information only and should not be relied on as legal advice. Midpage is not a law firm and does not offer legal advice.