Kalsi ad seen in Washington on March 27, 2026.
Paul Lester | CNBC
The 9th U.S. Circuit Court of Appeals has rejected a prediction market platform’s request to block the Nevada Gaming Control Board, concluding that sports-related event contracts are not federally regulated derivatives.
The court rejected the appeals of two prediction market platforms, Kalshi and Crypto.com, who asked Nevada to shut down businesses that the state says offer gambling activities outside of the Gaming Control Board. The court also ruled against Robin Hood’s Request for injunctive relief. The company also features event contracts on its trading platform.
Sports-related event deals offered by platforms have come under scrutiny, with 44 states claiming they constitute nothing more than sports betting. But the platform and its federal regulator, the Commodity Futures Trading Commission, insist that all event contracts, regardless of theme, are swaps. Swaps are a type of derivative that falls under the jurisdiction of the CFTC, which claims it has exclusive jurisdiction to regulate all event contracts.
The CFTC has even sued nine states to protect what it believes is its sole right to create rules for prediction markets.
However, the Ninth Circuit rejected that argument. “Sporting event contracts are not ‘exchanges’ because they are sports wagers,” the court said in its opinion for Carsi.
The Nevada Attorney General’s Office called the ruling a major victory.
“Carsi attempted to circumvent Nevada’s gaming laws by claiming that its sports betting products were federally regulated financial products beyond the reach of state regulators,” Alcinia Whiters, deputy director of communications for the firm’s office, said in a statement. “The Ninth Circuit rejected that argument, making clear what we have argued all along: Just because a company calls sports betting an ‘event contract’ does not make it something different…Our office is proud to have defended Nevada’s authority.”
A CFTC spokesperson said in a statement to CNBC that while the court understands that swaps are exclusively regulated by the commission, it would be a mistake to believe that sports-related event contracts do not fall within that definition.
“A derivative contract structured as a swap is a swap regardless of the underlying subject matter. The only statutory exceptions are onions and movie box office receipts,” the spokesperson said in a statement. “The Ninth Circuit erred today by creating a new nontextual exception to the CEA,” he said, referring to the Commodity Exchange Act, which details which event contracts the CFTC can approve and deny.
Legal experts widely expect the issue of sports-related event contracts, and whether state gaming regulators and the CFTC have the right to regulate them, will eventually reach the Supreme Court.
That seems highly likely now, as the Ninth Circuit’s decision contradicts an early April U.S. Third Circuit Court of Appeals decision. In this case, the Third Circuit held that only the CFTC has jurisdiction to regulate sports-related event contracts.
Commodity Futures Trading Commission Headquarters in Washington, August 20, 2026.
Daniel Heuer | Bloomberg | Getty Images
“This is a classic circuit split,” said Joshua Mitz, a professor at Columbia Law School. Circuit splits occur when federal appellate courts issue different decisions on the same subject matter. “Ultimately, this is the kind of legal controversy or legal disagreement that goes all the way to the Supreme Court.”
In a post on X, Kalsi litigation director Joby Dedaj said that while the Ninth and Third Circuit decisions agreed that federal law stops states from regulating federally sanctioned exchanges, the Ninth Circuit went too far in declaring sports-related event contracts not swaps. He added that Congress in the Commodity Exchange Act gave the CFTC the authority to determine whether event contracts related to “gaming” are contrary to the public interest, rather than the state.
Robinhood said in a statement that it plans to appeal the decision. “All eligible customers must have access to these markets, which are federally regulated by the CFTC and offered through Futures Commission merchants registered with the CFTC,” the spokesperson said.
Crypto.com did not respond to requests for comment.
Meanwhile, the stock prices of the two online sportsbooks are draft kings and flutter entertainment FanDuel’s parent company rose following the ruling. Both stocks have been hurt in the last year by concerns that prediction markets will disrupt the industry, with both companies rushing to launch their own prediction market exchanges online.
DraftKings rose 7% and Flutter rose more than 6%.
Disclosure: CNBC and Kalsi have a commercial relationship that includes customer acquisition and minority ownership.
