Kalshi Asks 11 Judges to Undo a Sports-Swap Split

Kalshi asked 11 Ninth Circuit judges on September 9 to rehear a ruling that treats its sports event contracts as state-regulated bets. A three-judge panel held on August 28 that those contracts are not swaps under the Commodity Exchange Act, so Nevada’s gaming laws can reach them. The same product still trades in New Jersey under a federal injunction.

That mismatch is now the business. Prediction markets listed the contracts as CFTC products. State gaming boards, and now a Canadian province, are treating the identical payoff as a wager.

The Ninth Circuit Called Sports Contracts Bets

The case is KalshiEX, LLC v. Assad, docket 25-7516. Judges Ryan D. Nelson, Bridget S. Bade, and Kenneth K. Lee voted 3-0 to leave in place District Judge Andrew Gordon’s order dissolving Kalshi’s preliminary injunction against the Nevada Gaming Control Board.

KalshiEX, LLC is a designated contract market registered with the Commodity Futures Trading Commission. It lists event contracts, including contracts that pay based on who wins a game or what happens during one. Nevada’s board sent a cease-and-desist letter in 2025 saying the firm was running an unlicensed sportsbook and warning of civil or criminal charges.

Kalshi sued and argued that the CEA gives the CFTC exclusive power over instruments traded on its exchange. The panel said Kalshi had not shown a likelihood that federal law blocks Nevada as applied to sports contracts. In the court’s words, the sports event contracts were not swaps because they were sports bets.

The statute the company is fighting over is specific. As amended by the Dodd-Frank Act, a swap includes any agreement that provides for a payment “dependent on the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence,” 7 U.S.C. § 1a(47)(A)(ii). Section 2 of the CEA, the panel agreed, does preempt state regulation of swaps that are traded on a designated contract market. The contracts trade on one. The panel still said they are not swaps.

A second federal hook did not save them. Dodd-Frank’s Special Rule, 7 U.S.C. § 7a-2(c)(5)(C), lets the CFTC bar event contracts that involve gaming, war, terrorism, assassination, or activity that is unlawful under federal or state law. CFTC Rule 40.11(a) currently puts a categorical bar on contracts that involve, relate to, or reference gaming. Kalshi had listed the sports contracts by self-certification. The panel said that listing was unlawful under the Special Rule and Rule 40.11.

Judge Lee concurred. He wrote that the Special Rule looks as if it gives the CFTC discretion over gaming contracts rather than a flat statutory ban, but he said that question can wait because Rule 40.11 still bars them. The panel sent Kalshi’s election contracts back to the district court.

Kalshi’s 78-page petition says a full-court rehearing is required because the panel created a split with the Third Circuit, used reasoning that fights itself, and departed from the CEA’s text. The company told the court it is now open to state penalties while following its federal regulator.

As a result, Kalshi now stands exposed to civil and criminal liability, even though it is abiding by federal law and the mandate of its exclusive federal regulator.

KalshiEX, LLC, petition for rehearing en banc, U.S. Court of Appeals for the Ninth Circuit

A Kalshi spokesperson said the three-judge panel leaned on a CFTC rule that is being replaced, and that once a new rule is in place material parts of the opinion will be moot. That rewrite is still a proposal, not a final regulation.

New Jersey Takes the Sports-Swap Fight to the Justices

Four months earlier, a different appeals court read the same statute the other way. On April 6, 2026, the Third Circuit in KalshiEX, LLC v. Flaherty, No. 25-1922, affirmed a preliminary injunction that blocks New Jersey from enforcing its sports-wagering laws against Kalshi’s sports-related event contracts.

Judge David J. Porter wrote for himself and Chief Judge Michael A. Chagares. They held that the contracts are swaps, that the CEA occupies the field of trading on a designated contract market, and that state gambling law would stand as an obstacle to a single federal rulebook. The court was careful about the posture. Kalshi showed a reasonable chance of winning, which the panel said is better than negligible and is not the same as a final judgment on the merits. The case goes back to the District of New Jersey for that fight.

Judge Jane Richards Roth dissented. She described opening Kalshi’s page for a Carolina Panthers-Tampa Bay Buccaneers game and finding a winner market, a spread, a total, and a touchdown contract on Mike Evans. Those listings, she wrote, are virtually indistinguishable from the products on DraftKings and FanDuel. Branding them as sports-event contracts, she said, does not change what they are.

TWO APPEALS, TWO ANSWERS

On September 2, New Jersey asked the Supreme Court to take the Third Circuit case. The petition, filed by Attorney General Jennifer Davenport and Mary Jo Flaherty, the interim director of the Division of Gaming Enforcement, poses one question: whether Dodd-Frank preempted state sports bets offered on CFTC-registered markets. Solicitor General Jeremy M. Feigenbaum is counsel of record.

The appendix is the tell. New Jersey lists parallel matters involving Kalshi, Robinhood, Coinbase, Polymarket, QCX, and NADEX in Arizona, Connecticut, Illinois, Iowa, Kentucky, Maryland, Massachusetts, Michigan, Montana, Nevada, New Mexico, New York, Ohio, Rhode Island, Tennessee, Utah, Washington, and Wisconsin, plus several suits brought by the United States against states. Exclusive jurisdiction was supposed to produce one federal answer. The docket instead looks like 50 small ones.

Some accounts described a Robinhood cert petition from the Ninth Circuit. A Robinhood spokeswoman said on Thursday, September 10, that the company had not filed a petition at that time. Sports-betting lawyer Daniel Wallach wrote that the Ninth Circuit’s Robinhood opinion is only a few pages and borrows the Kalshi reasoning, which is a weak vehicle while rehearing is pending. He also put numbers on Kalshi’s own path. In fiscal 2025 the Ninth Circuit received 730 petitions for en banc review, called for a vote on 30, and granted 11, about 1.5 percent. Kalshi’s petition cites a conflict with the Third Circuit, not a fight inside the Ninth.

WHAT WE KNOW

• The split: Two federal appeals courts have now given opposite preliminary answers on whether sports event contracts are CEA swaps.
• The filings: Kalshi has asked for en banc rehearing in the Ninth Circuit, and New Jersey has asked the Supreme Court to review the Third Circuit injunction.
• The product: The sports contracts still trade on a CFTC-registered designated contract market.

WHAT IS UNCONFIRMED

• En banc: The Ninth Circuit has not said whether it will take the case as a full court.
• The Justices: The Supreme Court has not said whether it will hear New Jersey’s petition.
• Robinhood: The brokerage has not confirmed a Supreme Court filing of its own.

Going to the full Ninth Circuit first only works if that court wants to clean up the swap definition. If it does not, states in the West keep a green light to treat the contracts as bets while the Supreme Court clock on the New Jersey case runs separately.

Sports Already Supplies Most of Kalshi’s Volume

The legal fight is not about a side product. A Pew Research Center analysis of data from The Block found that combined monthly trading on Kalshi and Polymarket rose from less than $5 billion in September 2025 to about $24 billion in April 2026, and that sports trading dominates on Kalshi in a way it does not on Polymarket.

Public trade-report figures compiled on Dune from Kalshi’s own prints show how far that mix has gone. In August the exchange did $11.4 billion in staked volume, the total you get by multiplying each trade by the price at which it cleared rather than by a $1 face value. Sports single-game markets were $5.6 billion, about 49 percent of that book. Adding multi-leg combos and then the smaller leagues in the residual bucket lifts sports to about 61 percent.

WHERE THE AUGUST BOOK SAT

Face-value prints, which treat every contract as a dollar, make August look like $40 billion and push the sports share higher. The staked number is the one that tracks money actually put down. Either way, a Nevada-style holding does not nick a political-odds shop. It hits the contracts that now carry most of the book.

Macro and political volume on the same prints was $64.3 million in August, down from $95.8 million in January, while the whole exchange grew from $3.8 billion to $11.4 billion. The growth is the sports book. That is why state gaming agencies are in court and why a Canadian lottery operator is in the next paragraph.

British Columbia Treats the Same Product as Gambling

On August 28, the same day as the Ninth Circuit opinion, British Columbia’s Independent Gambling Control Office issued its own line. The IGCO said products based on sports and entertainment outcomes are gambling and must be handled under the Criminal Code of Canada and provincial gaming law. It classified sports and entertainment contracts as gambling, not as securities or derivatives.

The office was blunt about who may offer them. “The British Columbia Lottery Corporation (BCLC) is the only entity permitted to conduct and manage commercial gambling, including online gambling and sports betting, on behalf of the provincial government,” the IGCO said. PlayNow.com remains the only authorized commercial online gambling site in the province.

That statement followed a joint notice on August 27 from the Canadian Securities Administrators and the Canadian Investment Regulatory Organization. Those financial regulators said sports and entertainment contracts on prediction markets fall outside securities and derivatives law. Other event contracts, the British Columbia Securities Commission added, still raise questions; that review is ongoing.

WHAT CANADA HAS ALREADY CLOSED

• Sports and entertainment: CSA and CIRO took those contracts out of securities and derivatives law, and the IGCO put them under gambling statutes.
• Who may offer them in B.C.: Only BCLC may conduct and manage commercial gambling, including online sports betting.
• What can still list: Wealthsimple, in a partnership with Kalshi, and Interactive Brokers have CIRO approval for economic, financial, or climate contracts, not for sports results or elections.
• Still open: The securities commission said it is still assessing whether other event-contract categories belong in its file.

Canadian lottery corporations in several provinces have already said the financial-regulator notice does not go far enough. The hidden party in this fight is not a trader. It is the public operator that holds the sports-betting franchise and the tax that comes with it. If a CFTC-style contract is a swap, that franchise is optional. If it is a bet, the franchise holds.

The Gaming Rule the Panel Used Is Already Changing

The Ninth Circuit’s second pillar is a rule the CFTC is trying to rewrite. On June 10, 2026, the commission published a notice of proposed rulemaking on Regulation 40.11, the provision that now categorically bars contracts involving gaming. Chairman Michael Selig said the amendments are meant to set clearer criteria for when an event contract “involves” an enumerated activity such as gaming, war, terrorism, or assassination.

The proposal still calls sports outcome contracts gaming. It then builds a public-interest test under which game winners, championship futures, and most of what currently trades would likely survive, while five buckets would not: player injuries, officiating, discrete in-game acts by a named player, physical altercations, and pre-collegiate sports. Casino-style games of chance would likely fail the test too. If adopted, the changes would take effect 60 days after publication in the Federal Register.

That is the tension inside the August 28 opinion. The panel said the sports contracts are not swaps. It also leaned on a CFTC gaming rule that only has work to do if those contracts sit inside the event-contract regime the commission oversees. A World Cup final or a league championship is an event with sponsors, media rights, and commercial fallout. That is the reading the Third Circuit used to bring the contracts under § 1a(47)(A)(ii). The Ninth Circuit used the same facts to call them bets.

THE LEGAL CALENDAR

1. 2025: The Nevada Gaming Control Board sends Kalshi a cease-and-desist letter over sports and election contracts and warns of civil or criminal charges.
2. April 28, 2025: The District of New Jersey grants Kalshi a preliminary injunction against state sports-wagering enforcement.
3. April 6, 2026: The Third Circuit, 2-1, affirms that injunction and treats the sports contracts as swaps.
4. June 10, 2026: The CFTC proposes rewriting Rule 40.11 around a factor-based public-interest test.
5. August 27, 2026: CSA and CIRO say sports and entertainment prediction contracts are not securities or derivatives.
6. August 28, 2026: The Ninth Circuit, 3-0, holds the sports contracts are not swaps, and British Columbia’s IGCO says they are gambling.
7. September 2, 2026: New Jersey petitions the Supreme Court.
8. September 9, 2026: Kalshi petitions the Ninth Circuit for rehearing en banc.

CFTC Chairman Selig has also used emergency authority to stop a designated contract market from tearing up open trades to satisfy a state court, saying a state cannot force a DCM to break its federal duties. That is the other half of the same collision: federal exclusive jurisdiction on paper, state benches and gaming boards in practice.

Polymarket Hired Amazon’s Former Finance Chief

While the courts sort the sports book, the other large venue is hiring as if the category is going to get bigger. On September 10, Polymarket named Warren Jenson chief financial officer, its first. Jenson, 69, has been finance chief at Amazon, Electronic Arts, Delta Air Lines, and NBC, and later president and CFO at Nielsen and LiveRamp. He sits on the boards of DigitalOcean, Dropbox, and Ripple. He reports to founder and CEO Shayne Coplan, who is 28.

Polymarket US operates as a CFTC-regulated designated contract market, the same charter Kalshi holds. Jenson’s brief is capital strategy, long-range planning, and the finance staff for a U.S. and global build-out. Coplan framed the hire as a staffing problem, not a legal one.

We’re assembling the team to match the opportunity in front of us. Warren has led finance at some of the most consequential companies in the world, and his experience will be critical to everything we build from here.

Shayne Coplan, founder and CEO, Polymarket press release

Jenson was as direct. “Polymarket created a massive new global market category. The opportunity ahead of us is enormous,” he said. “I’m joining Shayne and the leadership team to put the capital strategy and operating discipline in place to move quickly at scale.”

That is the bet the legal map now prices. In New Jersey, a sports event contract is a federal swap on an injunction. In Nevada, it is a wager a gaming board can police. In British Columbia, it is gambling only BCLC may run. The CEA’s exclusive-jurisdiction clause was written so a listed contract would not change legal character at a state line. Until the Ninth Circuit, the Supreme Court, or a finished Rule 40.11 says otherwise, it does.

Disclaimer: This article is news reporting and analysis of court filings, regulator statements, and company announcements. It is informational only and is not legal, investment, or gambling advice. It does not tell readers whether to trade event contracts, place sports wagers, or take any position in a live case. Anyone considering a trade or a compliance decision should consult a licensed attorney and, where money is at stake, a qualified financial adviser in their jurisdiction. Figures, docket statuses, and product rules reflect the cited filings and statements as of the dates named above and can change with a court order or a final CFTC rule.