The U.S. Court of Appeals for the Ninth Circuit ruled 3-0 on Aug. 28 that sports event contracts offered by Kalshi are not swaps, and that the Commodity Exchange Act does not preempt Nevada from applying gambling regulations to those contracts. The court also vacated an earlier injunction that had allowed Kalshi to keep offering the contracts, while requests for injunctive relief from Crypto.com and Robinhood were denied.
The ruling conflicts with a decision issued by the U.S. Court of Appeals for the Third Circuit in April, which found that Kalshi’s contracts were likely swaps protected by federal law and therefore beyond state regulation. That split between two federal appellate courts now sets up a possible appeal to the U.S. Supreme Court, with New Jersey facing a Sept. 3 deadline to file.
Kalshi said it will seek further review and argued that current Commodity Futures Trading Commission, or CFTC, rules do not prohibit sports event contracts. Robinhood said it plans to appeal. The CFTC, for its part, said derivatives structured as swaps are swaps, and that the law contains no relevant exception other than for onions and movie box office receipts.
The U.S. Court of Appeals for the Ninth Circuit ruled 3-0 on Aug. 28 that sports event contracts offered by Kalshi are not swaps, and that the Commodity Exchange Act does not preempt Nevada from applying gambling regulations to the contracts.
The court also vacated an earlier injunction that had allowed Kalshi to continue offering the contracts. Requests for injunctive relief from Crypto.com and Robinhood were denied as well.
The decision clashes with an April ruling from the U.S. Court of Appeals for the Third Circuit, which said Kalshi’s contracts were likely swaps and were protected by federal law from state regulation. The differing outcomes mean the two federal appellate courts are now split on the issue.
New Jersey’s deadline to seek U.S. Supreme Court review is Sept. 3.
Kalshi said it will seek further review and maintained that current Commodity Futures Trading Commission, or CFTC, rules do not prohibit sports event contracts. Robinhood said it plans to appeal. The CFTC said derivatives designed in swap form are swaps, and that the law provides no related exception other than for onions and movie box office receipts.
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