Ninth Circuit: Commodity Law Doesn't Shield Kalshi From State Gambling Cops

A unanimous Ninth Circuit panel ruled on August 28, 2026 (KalshiEX, LLC v. Assad) that federal commodities regulation does not strip states of authority over sports wagering, affirming a lower court’s decision to dissolve the preliminary injunction that had kept Nevada gaming regulators away from Kalshi’s sports-outcome contracts. Kalshi runs a federally regulated prediction market where users trade ‘event contracts’ on real-world outcomes, including the results of sporting events. Its core legal argument has been that oversight by the Commodity Futures Trading Commission gives the CFTC exclusive jurisdiction over those contracts and preempts state gambling law. The panel rejected that theory as applied to sports.

The court’s reasoning was that Congress did not quietly hand nationwide control over sports betting to a financial-markets regulator through the Commodity Exchange Act — legislation shaped largely by the 2008 financial crisis and aimed at derivatives markets, not casinos. Absent a clear signal that lawmakers meant to displace the states’ and tribes’ traditional authority over wagering, the panel declined to read the statute that broadly.

The practical fallout lands hardest in Arizona, where a federal judge had previously blocked the state attorney general from prosecuting Kalshi on preemption grounds; this ruling undercuts that protection and could revive Arizona’s criminal case. It also sharpens a growing circuit split: the Third Circuit had sided with Kalshi on similar questions, and a direct conflict between appeals courts raises the odds that the Supreme Court will ultimately have to decide whether prediction-market sports contracts are federally protected financial instruments or state-regulated gambling.