How Kalshi Can Use the Ninth Circuit’s Ruling to Help His Case

On Friday Ninth Circuit unanimously ruled against Kalshi. A three-judge panel found that Kalshi sports markets should not be exempt from state sports betting laws. While this appears to be a major blow to the operator, the law professor said the decision provides enough reason to be optimistic. Melinda Roth.

The decision, which conflicts with the Third Circuit, sets up a potential Supreme Court showdown between state gambling regulators and prediction markets. New Jersey formally asked the Supreme Court to hear the case on Wednesday.

“I don’t think the Ninth Circuit’s decision against Kalshi will have any new consequences as predicted,” Roth told CasinoBeats this week. “Everyone knew Nevada was going to rule against Kalsha; the only question was how the court would reach its conclusion. In my opinion, this does not change Kalshi’s chances of winning the Supreme Court, despite the losses they have suffered in the courts recently.”

“In fact, the Ninth Circuit’s decision gives Kalshi (and other platforms) some leverage in future legal battles,” she added.

Roth joined the faculty at New England Law in Boston this month. She specializes in sports law and corporate finance and closely follows developments in prediction markets.

Her article analyzing “new frontiers in investing” will soon be published in the Connecticut Law Review. The publication puts forward a “controversial” point of view that Commodity Futures Trading Commission The CFTC is the relevant regulator of sporting event contracts.

CFTC Continues to Hold Power

In a 50-page ruling released Friday, the justices cited several previous cases that formed the basis of their decision. One is included Lauper Brighta 2024 verdict that ended a 40-year-old rule requiring judges to defer to federal agency experts, returning the power to courts to interpret vague laws.

“The judges cite Loper Bright and give no credit to the CFTC, but the difference is that in this case, the CFTC (as amicus) is interpreting its own rules (i.e., the Special Rule) and Loper Bright is not addressing the issue because it is a matter of disrespect for ambiguous laws,” Roth said.

Although all three judges sided with Kalshi, Judge Kenneth Kiyul Lee left some ambiguity as to how the Special Rule that gaming contracts were contrary to the public interest could be interpreted.

“The provision of the special rule states thatThe Commission may determine What [certain contracts or swaps] are contrary to the public interest if they “affect”. . . games,” the resolution says.

Roth believes Kalshi can use this in future legal battles.

“Judge Lee’s concurrence recognizes that it appears that the CFTC does have the authority not to ban all gaming contracts. Moreover, it is clear that the CFTC’s proposed rulemaking could completely change how the court views this issue anyway, but they can only rule on what the rules are now,” she said.

The CFTC has proposed new rules that could more clearly address sports markets. Although many have raised objections, bringing them into the Supreme Court will have a major impact on the outcome.

Definition of swaps remains unclear

In the ruling, the judges said Kalsha’s sports markets do not fall within the Commodity Exchange Act (CEA) classification of “swaps.”

The CEA defines “swaps” as “any agreement, contract or transaction… which provides for any purchase, sale, payment or delivery… which depends on the occurrence, non-occurrence or degree of occurrence an event or unexpected situation associated with potential financial, economic or commercial consequences“

Roth says the Ninth Circuit’s ruling does not make it clear that markets are not swaps.

“The court says that contracts for sporting events are not swaps, but it is never mentioned how they were self-certified, listed, traded and centrally cleared as swaps.“, she says.

Kalshi has long argued in courts that his sports markets fall under the category of swaps because they have real economic consequences. The Ninth Circuit’s ruling said many of its markets are not swaps because they are outcome-based rather than event-based.

“We do not refer to whether the Dodgers will win the World Series, or how many touchdowns Fernando Mendoza might throw in a game, or how many runs BYU Football will score as an ‘event,’” the ruling said.

He further added: “Contracts for sporting events in Kalshi have the distinctive features of sports betting.“

But what those signs are and how they are defined matters, Roth says. She argues that the ruling does not adequately explain which markets should be banned, since many other markets could also be seen as outcome-based rather than event-based.

“While the court brought back issues related to campaign event contracts, they also ignored all the other ‘trades’ that can make the difference between event and outcome that they claim is present in sports (the game is the event and the outcome is the result). The same will be true for many other event contracts in various fields (financial, economic, cultural, etc.),” ​​Roth said.

The claim that sports markets are swaps may be more difficult to substantiate in the context of express trading, which has become an increasingly important driver of trading volume in Kalshi. This week they accounted for 50% of all transactions. A judge in Connecticut said the negotiations “have no independent financial, economic or commercial implications at all.”

SCOTUS Shows Willingness to Abolish Circuit Nine

Advocate Stephen Pipgrass also reported to CasinoBeats that the Ninth Circuit’s ruling does not materially worsen the fortunes of prediction markets.

Like Roth, Pipgrass said the verdict was expected and foreshadows the Supreme Court showdown everyone has been waiting for.

“Of course, you always prefer to have the appellate court rule in your favor,” Piegrass said. “But it is likely this appeals court that will do the least damage to prediction market platforms’ chances at the Supreme Court.”

“In recent years, Supreme Court Shows Willingness to Overturn Ninth Circuit Decisions. If you are a platform operator weighing the odds, you would prefer to appeal an unfavorable Ninth Circuit decision to this Supreme Court rather than to any other court.”

Since 2007, the Supreme Court has abolished 79.5% cases it agreed to hear in the Ninth Circuit, giving it the highest reversal rate of any appellate district during that period. This figure has risen recently, with 15 of 16 cases being overturned since 2020.

Pipgrass believes the justices were well aware of this fact and wrote the decision accordingly, including arguments that could be heard by the Supreme Court.

“When you read the decision, it is clear that the Ninth Circuit had this dynamic in mind,” he said. “Judge Nelson’s opinion relies heavily on doctrines of interpretation that may appeal to strict textualists on the Supreme Court who may reconsider it.”

“Ultimately, this may be the most interesting observation about this decision: These lawyers themselves seem to believe that this issue is likely to end up before the Supreme Court, and they wrote the decision with that in mind.”

Key Issues: Doctrine Could Limit CFTC Power

Gaming lawyer Daniel Wallach pointed to some arguments that might appeal to the Supreme Court’s conservative majority. SCOTUS currently has a 6–3 conservative majority that strongly emphasizes textualism, originalism, and limits on federal administrative power.

Wallach and Roth have previously appeared together on prediction markets, but admittedly they don’t always see eye to eye. In a post on X, he outlined a number of reasons why the decision should include Kalshi and other operators.

Over the weekend, I analyzed the Ninth Circuit’s opinion and prepared a summary, dividing it into distinct thematic categories (i.e., exchanges, limiting principle, substantive issues, Rule 40.11(a), gambling, preemption, etc.). The best way to master and contextualize the solution. pic.twitter.com/tjs21URGXI

— Daniel Wallach (@WALLACHLEGAL) August 31, 2026

He notes that the judgment states that Kalshi’s definition of swaps is too broad and lacks a limiting principle. In addition, the fundamental issues doctrine may limit the CFTC’s ability to revise its rules.

The Essential Issues Doctrine is a principle of constitutional and administrative law that if a federal agency wants to make a rule on a matter of great “economic and political significance,” it must point to clear and express authorization of Congress.

Former Senator Chris Doddone of the authors Dodd-Frank Actwhich amended the CEA in 2010, explicitly stated that Congress does not intend to authorize sports contracts. Congress doesn’t seem particularly interested in approving contracts for sporting events right now.

Many questions remain, and the Ninth Circuit’s decision is far from resolving the debate over whether contracts for sporting events are fair and legal. States have begun citing the verdict in their legal battles with prediction markets. However, as Roth notes, Kalshi can also identify areas on which to focus future arguments.