GrayStak | August 28, 2026
The Ninth Circuit ruled this morning that Kalshi’s sports event contracts are likely not derivatives under federal law because they are sports bets. The published opinion in KalshiEX v. Assad affirms a Nevada district court’s decision dissolving the injunction that had shielded the exchange from state gaming regulators. The panel was unanimous. Judge Ryan Nelson wrote the opinion, joined by Judge Bridget Bade.
“The crucial context that leads us to resist the broadest possible reading is that Kalshi has a gambling problem.”
KalshiEX v. Assad, No. 25-7516 (9th Cir. Aug. 28, 2026)
For Kalshi to deny that its contracts are sports bets, Nelson wrote, “is disingenuous.” The opinion opens with Kalshi’s own advertising, which calls the product “the first app for legal sports betting in all 50 states,” and notes that sports contracts produced over 90 percent of the company’s trades in 2025 and 95 percent of its revenue.
The ruling creates a direct circuit split. On April 6, the Third Circuit reached the opposite conclusion in KalshiEX v. Flaherty, holding that the same contracts are likely swaps within the CFTC’s exclusive jurisdiction and barring New Jersey from enforcing its gambling laws. Two federal appeals courts now read the same statutory definition to opposite ends, in published opinions. New Jersey signaled in June that it would ask the Supreme Court to review its loss. The split it needed now exists.
The panel turned Kalshi’s own words against it. In 2024, fighting the CFTC over election markets in the D.C. Circuit, the company argued that “gaming” covers any contract contingent on a game and that Congress did not want sports betting on derivatives markets. “We agree,” Nelson wrote. The opinion goes further than rejecting preemption. It concludes that Kalshi’s self-certification and listing of the contracts violated the CFTC’s own regulation, 17 C.F.R. § 40.11, a rule the agency has never invoked against the company.
Kalshi said it will keep fighting. “Despite the 9th Circuit’s opinion, we still believe the CFTC regulations as written do not prohibit sports contracts, and in any event, the CFTC is working to clarify those regulations,” a company official said in a statement reported by Sportico. “We will be seeking further review.” Shares of DraftKings and FanDuel’s parent rose more than 5 percent in afternoon trading on August 28. Kalshi is not publicly traded; the company is reportedly raising new money at a $40 billion valuation.
The commission itself lost today. The CFTC argued the appeal as amicus on Kalshi’s side of the jurisdictional question, seventeen days after invoking emergency authority to order the exchange to keep operating nationwide over New York’s objection. Judge Kenneth Lee concurred separately and said where the fight goes next: the statute may leave the commission discretion over gaming contracts, and the prohibition holds only while § 40.11 stays on the books. The agency has proposed amending it. That rulemaking is now the single lever that could move the entire analysis. Kalshi is relying on it.
The ruling is not total. The panel remanded Kalshi’s election contracts for separate analysis and decided nothing about them. And the ruling applies a preliminary standard, likelihood of success, with the merits still ahead. The same panel denied Kalshi’s motion to stay the Nevada state proceedings, where a penalty motion seeking $120,000 per day is pending.
The Illinois position
Illinois Attorney General Kwame Raoul sits on both sides of this map. His office joined the 39-state amicus brief backing Nevada in the Ninth Circuit. It also defends three federal lawsuits in Chicago, filed by Kalshi, the CFTC and the Department of Justice, and Coinbase, all attacking the state’s new sports wagering law and its 25 percent tax on prediction market trades. All three cases sit with one judge, Martha M. Pacold, with four preliminary injunction motions fully briefed before her.
If sports event contracts are not swaps, the Commodity Exchange Act does not displace the Illinois statute, and the fight over the tax never starts. The Ninth Circuit does not bind the Seventh, and the Third Circuit’s contrary holding remains live authority for Kalshi in Illinois. Pacold now has a published opinion on each side of the question she must answer.
On the afternoon of the ruling, motions for leave to file landed in all three Chicago cases within a three-minute span, from 1:13 to 1:15 p.m. Central. The docket entries do not yet identify the filings’ contents or the moving party.
Under a June agreement filed on the docket, Illinois refrains from enforcing its sports wagering and criminal gambling laws against Kalshi only while the company’s injunction motion is pending. Whenever Pacold rules, the pause ends. The circuit split is national. The first court forced to choose between its two sides may be a single courtroom on Dearborn Street.
GrayStak publishes its full investigation on Friday, September 4: how Illinois wrote a 25 percent tax on prediction market trades, how all three federal challenges landed in one courtroom, and what the exchange told the Ninth Circuit about which tax it accepts.
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Reported from the slip opinion published by the Ninth Circuit on August 28, 2026 (No. 25-7516), the dockets of the Ninth Circuit and the Northern District of Illinois, and prior GrayStak reporting. Kalshi’s statement, the share price movements, and the reported valuation are as reported by Sportico, the share figures as of afternoon trading on August 28. GrayStak holds no position in any company named.