Ninth Circuit Deals Kalshi a Loss, Setting Up a Supreme Court Showdown Over Sports Prediction Markets

A Ninth Circuit ruling against Kalshi splits the federal courts on whether sports prediction markets must follow state gambling law, setting up a likely Supreme Court fight.

By
NeuroOdds.xyz Editor

Published: September 6, 2026 • Updated: September 6, 2026

A federal appeals court ruling handed down on 28 August 2026 has sharpened one of the biggest open questions in the odds and betting industry this year: whether CFTC-regulated prediction markets like Kalshi and Polymarket have to follow the same state-by-state gambling rules as traditional sportsbooks, or whether federal law lets them operate outside that framework entirely.

The US Court of Appeals for the Ninth Circuit ruled 3-0 against Kalshi in KalshiEX, LLC v. Assad, affirming a district court decision that dissolved a preliminary injunction the platform had been relying on. The panel held that sports event contracts do not count as "swaps" under the Commodity Exchange Act, and that federal law does not preempt state gambling regulation in this area.

That directly contradicts an earlier ruling from the Third Circuit, which had sided with Kalshi on the same core legal question. With two federal appeals courts now disagreeing, the dispute has a confirmed circuit split — exactly the kind of disagreement the US Supreme Court typically steps in to resolve.

Why This Matters for Odds and Betting Markets

Prediction markets have grown into a serious presence in the space NeuroOdds.xyz covers. Sports-related event contracts have made up roughly 80% of Kalshi's trading volume since mid-2024, and industry analysts at Bernstein Research have projected total prediction-market volume could climb from around $51 billion in 2025 toward $240 billion by the end of 2026.

Unlike a licensed sportsbook, which needs a state gaming license to take a bet on, say, an NFL game, prediction market platforms have argued they only need federal registration with the Commodity Futures Trading Commission (CFTC) to offer similar contracts nationwide. That argument is now the subject of active litigation in multiple circuits.

A Patchwork of Lawsuits Across the Country

According to legal tracking published by law firm DLA Piper, 19 states are currently involved in litigation connected to prediction market platforms. Washington, Massachusetts, Michigan and Nevada have filed civil suits alleging that sports event contracts amount to unlicensed gambling, while Arizona pursued criminal charges before a federal court paused that prosecution. Minnesota has sought an outright ban on the platforms within the state.

Kalshi, for its part, has sued Nevada, New Jersey, Maryland, Ohio, New York and Utah seeking declaratory relief, while the CFTC has separately sued Arizona, Minnesota, Wisconsin, Illinois, New York and Connecticut, arguing those states' enforcement actions are preempted by federal commodities law.

Beyond the Third and Ninth Circuits, the Sixth Circuit is weighing separate appeals out of Tennessee and Ohio, and the Fourth Circuit heard arguments in a Maryland case earlier this year. The picture is further complicated by tribal nations in California, Wisconsin and New Mexico, which have sued Kalshi and Robinhood over sports contracts offered on or accessible from tribal land.

What Happens Next

New Jersey has until 3 September 2026 to file a petition asking the Supreme Court to take up the case. Given the now-confirmed circuit split, legal observers consider the issue a strong candidate for review, though there is no guarantee the Court will grant it or how quickly a decision would follow.

Separately, the CFTC has its own rulemaking in motion. In June 2026 the agency proposed a formal definition of "gaming" and a new framework for deciding which sports-linked contracts it will allow. Under the draft rule, broad-outcome contracts — final scores, point differentials, season-long stats, tournament advancement — would generally remain permitted, while narrower contracts tied to injuries, officiating calls, or discrete in-game events could be restricted. The public comment period closed on 27 July 2026, and shortly before that deadline, attorneys general from 44 states submitted a joint letter disputing the CFTC's authority to regulate sports-related contracts at all.

Leagues Are Taking Different Approaches

Major sports leagues have not responded uniformly. The NFL has asked Kalshi and Polymarket to avoid offering markets it considers vulnerable to manipulation. The NCAA has called on the CFTC to pause college sports contracts until clearer rules are in place, while also signaling openness to working with the agency on athlete-focused safeguards. MLB, by contrast, struck an exclusive licensing arrangement with Polymarket covering certain branding and official data, in exchange for Polymarket's commitment to build an integrity framework specific to baseball markets.

Athlete involvement is growing too — Milwaukee Bucks forward Giannis Antetokounmpo took an equity stake in Kalshi earlier this year, reportedly the first NBA player to do so.

What This Means for Bettors Comparing Sportsbooks and Prediction Markets

For readers using NeuroOdds.xyz to research betting markets, the practical takeaway is that the legal ground under prediction-market platforms is still shifting by jurisdiction. A sports contract available on a prediction-market app in one state may face a licensing challenge, a pending lawsuit, or an outright restriction in another, independent of whatever a traditional, state-licensed sportsbook offers in that same market.

This is a live, unresolved regulatory question rather than a settled one, and the outcome could reshape how sports-related contracts are offered nationwide over the next one to two years, depending on how the Supreme Court, the remaining circuit courts and the CFTC's final rule each land.

NeuroOdds.xyz Editorial Note

This article is published for informational and editorial purposes and summarizes publicly available legal and regulatory reporting on prediction markets and sports event contracts as of early September 2026. It does not constitute legal, financial or betting advice.

NeuroOdds.xyz is an independent sports betting and odds intelligence platform. We do not operate a sportsbook or prediction market, accept wagers, hold player funds or determine the outcome of any contract or bet. Readers should verify the current legal status of any sportsbook or prediction market in their own jurisdiction before registering, depositing or trading, and should not treat this article as confirmation that a particular platform is legally available to them.

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