Kalshi Sued by Nevada After Ninth Circuit Clears the Way (1)

The Ninth Circuit cleared the way for Nevada to bring an enforcement action against Kalshi Inc.'s exchange the same day the US agency overseeing derivatives markets told the appellate court that states attempting to regulate prediction markets are undermining exclusive federal jurisdiction

Nevada sued Kalshi, which speculators can use to effectively wager on the outcome of discrete events, in state court immediately after the US Court of Appeals for the Ninth Circuit issued a ruling Tuesday that denied KalshiEx LLC an administrative stay while its own appeal is pending.

Kalshi’s exchange requested the stay after the state said it intended to initiate an enforcement action Feb. 17, which its gaming control board did in state court Tuesday.

It comes the same day that the the Commodity Futures Trading Commission told that court gambling regulators such as Nevada’s shouldn’t be allow to “invade” its “exclusive jurisdiction over CFTC-regulated designated contract markets” by “re-characterizing swaps trading on DCMs as illegal gambling,” the agency said in an amicus brief it has proposed filing with the US Court of Appeals for the Ninth Circuit in Crypto.com’s appeal.

Crypto.com is appealing the US District Court for the District of Nevada’s denial of a preliminary injunction sparing it from state oversight last year. Its contracts weren’t swaps, Judge Andrew P. Gordon said then. That spat is one of many currently before state, district, and appellate courts around the country, including the Third, Fourth, and Ninth circuits.

If the Ninth Circuit were to affirm the lower court’s finding against Crypto.com, it “would reintroduce precisely the regulatory fragmentation Congress deliberately displaced,” the CFTC said.

The brief, awaiting acceptance by the court, is the CFTC’s first foray into the increasingly widespread litigation over whether state or federal regulators have dominion over the so-called prediction markets. States, tribes, and individuals contend some of those Kalshi and Crypto.com event contracts are really a form of gambling.

Exclusive Jurisdiction

The prediction markets say the CFTC retains exclusive jurisdiction over these contracts which enable traders to put money on a wide range of yes-no outcomes, such as whether the US will win in its matchup with Switzerland’s Olympic women’s curling team. State gambling laws are preempted by the CFTC’s jurisdiction, the agency said.

“The CFTC will no longer sit idly by while overzealous state governments undermine the agency’s exclusive jurisdiction over these markets by seeking to establish statewide prohibitions on these exciting products,” CFTC Chairman Michael S. Selig said in an opinion piece published by the Wall Street Journal Monday, adding the amicus brief Tuesday “should come as no surprise.”

The brief said under the Commodity Exchange Act, event contracts like those on Crypto.com’s designated contract market are swaps—derivatives that let parties speculate on future circumstances. Congress gave the CFTC authority over swaps in the wake of the 2008 financial crisis, the agency said.

Sports event contracts, the main target of the litigation, are included in that. “Because the statute does not demand certainty, sports event contracts fall comfortably within the statute’s reach,” the brief said.

New Chair

The CFTC, since Selig took the helm, has been warm toward prediction markets, announcing proposed rulemaking, appointing many of their executives to an advisory council, and now jumping into the litigation itself.

“This ends any ambiguity,” Nick Lundgren, Chief Legal Officer of Crypto.com, said in a statement emailed to Bloomberg Law before the filing hit the docket. “The CFTC has made it clear: U.S. prediction markets are federally regulated, preempting unlawful state actions. We applaud Chairman Michael Selig’s leadership in filing this amicus in our case.”

The CFTC represents itself.

Skadden, Arps, Slate, Meagher & Flom LLP, Cleary Gottlieb Steen & Hamilton LLP, and Snell & Wilmer LLP represent Crypto.com’s North American Derivatives Exchange Inc. in the Ninth Circuit.

Nevada’s attorney general’s office, which didn’t respond to an email seeking comment before the filing, and Mayer Brown LLP represent the state and its gaming control board. The Nevada Gaming Control Board said it doesn’t comment on pending litigation when asked about the CFTC filing an amicus brief.

Milbank LLP and Bailey Kennedy LLP represent Kalshi in the Ninth Circuit. Kalshi didn’t immediately respond to an email seeking comment.

Crypto.com’s case is N. Am. Derivatives Exch., Inc. v. Nevada, 9th Cir., No. 25-7187, amicus brief filed 2/17/26. Kalshi’s case is KalshiEX, LLC v. Hendrick, 9th Cir., No. 25-7516, administrative stay denied 2/17/26.