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CFTC Rule Changes May Not Alter Kalshi’s Ninth Circuit Case

By jili tutorial · October 6, 2026

The State of Play: Kalshi, Nevada, and the CFTC’s Unscheduled Rulemaking

The legal landscape for prediction markets remains deeply fractured. In a significant procedural move, Nevada has pushed back against Kalshi’s attempt to pause proceedings in the Ninth Circuit while the Commodity Futures Trading Commission (CFTC) finalizes new rules for event contracts. The state’s filing argues that no amount of regulatory tinkering by the CFTC can change the fundamental conclusion already reached by the court.

This conflict goes to the very core of the battle between state gambling laws and federal commodities oversight. Nevada’s position is that the Ninth Circuit’s ruling rests squarely on the text and purpose of the Commodity Exchange Act (CEA) itself — meaning a revision to a specific agency regulation is legally irrelevant to the court’s holding. For platforms like Kalshi, the stakes could not be higher. The outcome will determine whether event-based contracts are regulated as financial instruments or criminalized as illegal gambling.

Why Nevada Opposes a Hold on the Ninth Circuit Case

Kalshi’s Request: A Hold for Pending Rule Changes

On September 25, Kalshi formally petitioned the Ninth Circuit. The platform argued that the court should either grant a full en banc rehearing (a review by the full circuit court rather than a three-judge panel) or, as a secondary option, hold the petition in abeyance. The basis for the delay was the CFTC’s stated intention to revise Section 40.11 of its regulations, a provision that directly governs event contracts. Kalshi’s reasoning was that a new rule could alter the legal basis for the court’s original decision, rendering the current fight premature.

Nevada’s Counterargument: The Statute Trumps the Regulation

Nevada’s response, filed by attorney Nicole Saharsky of Mayer Brown, dismantles this logic. The state argues that the court was already fully aware of the CFTC’s intent to revise the rule when it issued its initial decision in August. Nevada insists that the agency’s statement merely provided a potential timetable for action, not a substantive change in the legal landscape that would justify a procedural stay.

The critical distinction lies in the source of the court’s ruling. Nevada contends that the Ninth Circuit’s analysis was rooted in the statutory definition of a “swap” under the CEA. The court examined the text, context, and purpose of the law itself, not merely the current wording of Section 40.11. Because the ruling is statutory, Nevada argues, changing a regulatory provision cannot unwind the court’s interpretation of the CEA.

What this means: Nevada is drawing a hard line between statutory interpretation (what the law says) and regulatory deference (what an agency writes). If a court rules that a contract is not a swap based on the CEA’s own language, the CFTC cannot simply redefine the contract as a swap via internal rulemaking to change that ruling. The state characterizes Kalshi’s request as a tactical delay designed to prolong operations while the broader enforcement dispute remains unresolved.

The Broader Judicial Landscape: A Pattern of Setbacks for Kalshi

Kalshi’s legal troubles are not confined to Nevada. A series of recent rulings across multiple circuits has created a formidable wall of precedent.

The Ninth Circuit Panel Ruling

In August, a three-judge panel of the Ninth Circuit ruled that Kalshi could not block Nevada gaming regulators from overseeing its platform. The court held that the Commodity Exchange Act likely does not pre-empt state gaming law in this context. This is the ruling Kalshi is now seeking to overturn via the en banc rehearing request.

Blue Lake Rancheria v. Kalshi (Tribal Land)

In a separate but related case, the Ninth Circuit also ruled against Kalshi in Blue Lake Rancheria v. Kalshi. The court held that the CEA does not authorize sports betting on tribal land, further limiting the platform’s ability to use tribal sovereignty to bypass state gambling laws.

The Sixth Circuit’s Position

The Sixth Circuit has been equally hostile. The court ruled that both Ohio and Tennessee can enforce their sports-gambling laws against Kalshi. This trio of victories for state regulators demonstrates a strong judicial consensus that sports-event contracts fall under the jurisdiction of state gambling authorities, regardless of the CFTC’s regulatory framework.

The CFTC’s Dual-Track Rulemaking

While the courts deliberate, the CFTC is pursuing its own regulatory strategy. The agency has submitted two proposed rules to the White House Office of Information and Regulatory Affairs (OIRA), the gatekeeper for federal regulations.

Despite these parallel tracks, Nevada’s argument remains central: changing the rules for the future does not retroactively alter the court’s reading of the current statute. The CFTC’s proposals are a forward-looking exercise, while the Ninth Circuit’s ruling is a backward-looking interpretation of existing law.

The Illinois Wildcard: A Contradictory Injunction

Adding to the chaos is a separate legal front in Illinois, which has produced a ruling that directly conflicts with the pro-state precedent seen elsewhere.

The Split Ruling

A federal judge in Illinois granted a preliminary injunction in part to Kalshi, Coinbase, and the CFTC. The court found that the state’s gaming-licensing regulations conflict with the federal law governing sports-event contracts. This is a significant victory for the industry, suggesting that at least one federal court sees the issue differently.

However, the situation is far from settled. The judge has ordered the parties to submit a proposed injunction order by October 29. The precise terms of that order—whether it blocks enforcement entirely or creates exceptions—will be critical.

The Tax Paradox

The Illinois case is further complicated by the state’s own contradictory behavior. The Illinois Gaming Board officially considers sports-event contracts to be illegal, untaxed gambling. Simultaneously, the state legislature has imposed a transaction tax of 1.75% to 3.5% on the very same contracts offered by prediction markets.

This creates a bizarre regulatory environment:

  1. The Gaming Board says the activity is illegal.
  2. The Legislature taxes it as a regulated commercial activity.

The challenges to the state’s wagering fees and enforcement actions remain unresolved, leaving platforms in a precarious position where they are taxed for an activity the state deems a crime.

What Remains Unresolved

The Ninth Circuit has yet to rule on Kalshi’s rehearing petition or the request for a delay. The outcome of this procedural battle will set the tone for the broader fight.

Key outstanding questions include:

For operators in the prediction market space, the current environment is one of maximum uncertainty. The debate over whether a federal contract can shield a product from state gaming requirements is far from over.