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How Kalshi Can Use Ninth Circuit Ruling to Help Its Cause, According to Law Professor Melinda Roth

By jili tutorial · September 4, 2026

How Kalshi Can Use Ninth Circuit Ruling to Help Its Cause, According to Law Professor Melinda Roth

The Ninth Circuit handed Kalshi a unanimous defeat on Friday, with all three judges ruling that the platform’s sports markets cannot be exempt from state sports betting laws. While the decision appears to be a serious blow, law professor Melinda Roth sees several openings within the opinion that could work in Kalshi’s favor moving forward. The ruling, which directly conflicts with an earlier decision from the Third Circuit, raises the likelihood of a Supreme Court showdown between state gambling regulators and prediction markets. New Jersey formally petitioned the Supreme Court to take up the case on Wednesday.

“I do not think that the Ninth Circuit ruling against Kalshi has any new consequences, as it was predicted,” Roth told CasinoBeats this week. “Everyone knew Nevada was going to rule against Kalshi; the only question was how the court would craft its opinion. To me, this does not change the chances of Kalshi winning at the Supreme Court, despite the losses they have been suffering in courts recently.”

“In fact, the ruling by the Ninth Circuit provides some openings for Kalshi (and other platforms) to use in the legal fight going forward,” she added.

Roth recently joined the faculty at New England Law in Boston. Her expertise spans sports law and corporate finance, and she has closely tracked the rise of prediction markets. Her upcoming paper in the Connecticut Law Review — which analyzes what she calls “a new frontier in investing” — argues the controversial position that the Commodity Futures Trading Commission (CFTC) is the proper regulator for sports event contracts.

CFTC Still Holds Power, but Deference Fades

In its 50-page ruling released Friday, the panel cited several precedents, including the 2024 Loper Bright decision. That case ended a 40-year rule requiring judges to defer to federal agency experts, returning interpretive authority over vague laws to the courts.

“The judges cite Loper Bright and do not give the CFTC deference, but the difference is that in this case, CFTC (as an amicus) is interpreting its own rules (like the Special Rule), and Loper Bright does not address this, as it was all about not giving deference to ambiguous statutes,” Roth stated.

While all three judges ruled against Kalshi, Judge Kenneth Kiyul Lee’s concurrence left room for interpretation regarding the Special Rule, which states that gaming contracts are contrary to the public interest. The ruling notes, “The Special Rule provision says that the ‘Commission may determine that [certain contracts or swaps] are contrary to the public interest if they ‘involve … gaming.’”

Roth believes Kalshi can leverage this ambiguity in future legal battles.

“Judge Lee’s concurrence admits that it seems the CFTC does have discretion not to ban all gaming contracts. Plus, it is clear that the CFTC’s proposed rulemaking might completely change how the court viewed this issue anyway, but they could only rule as to how the rules are now,” she said.

The CFTC has proposed new rules that could more explicitly allow sports markets. While many objections have been raised, introducing these rules before a Supreme Court case would dramatically affect the outcome.

“Swaps” Definition Remains Unsettled

The judges determined that Kalshi’s sports markets do not qualify as “swaps” under the Commodity Exchange Act (CEA). The CEA defines swaps as “any agreement, contract, or transaction … that provides for any purchase, sale, payment, or delivery … that is 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.”

Roth says the Ninth Circuit ruling fails to fully clarify the matter.

“The court says that sports event contracts are not swaps, but never addresses how they have been self-certified, listed, traded, and centrally cleared as swaps,” she notes.

Kalshi has long argued that its sports markets fall under the swaps category because they carry real economic consequences. The Ninth Circuit, however, said many of these markets settle on outcomes rather than events, and therefore are not swaps.

“We do not refer to whether the Dodgers win the World Series, or how many touchdowns Fernando Mendoza might throw in a game, or how many points BYU Football will win by as an ‘event,’” the ruling stated. It added that “Kalshi’s sports event contracts have the hallmarks of sports betting.”

But Roth argues that the ruling fails to define those hallmarks clearly, leaving many other markets vulnerable to similar arguments.

“While the court remanded issues relating to election event contracts, they have also ignored all the other ‘swaps’ that might have an event/outcome difference that they claim is present in sports (the game is the event, but the score is the outcome). It would be the same for many of the other event contracts in different areas (financial, economic, cultural etc.),” said Roth.

Parlays, which have become a significant part of Kalshi’s trading volume — accounting for 50% of all trades this week — may make the swaps argument even harder to sustain. A judge in Connecticut previously stated that parlays “have no independent financial, economic, or commercial consequence at all.”

Supreme Court Likely to Reverse Ninth Circuit

Lawyer Stephen Piepgrass also told CasinoBeats that the ruling does not significantly worsen the outlook for prediction markets. Like Roth, he said the verdict was expected and sets up the anticipated Supreme Court showdown.

“Of course, you always prefer that an appellate court rule in your favor,” Piepgrass said. “But this is probably the appellate court least likely to harm the prediction market platforms’ chances before the Supreme Court.”

“In recent years, the Supreme Court has shown a willingness to reverse decisions from the Ninth Circuit. If you are a platform operator looking at the odds, you would prefer to be appealing an adverse decision out of the Ninth Circuit to this Supreme Court, more than just about any other.”

Since 2007, the Supreme Court has overturned 79.5% of the cases it agreed to hear from the Ninth Circuit — the highest reversal rate of any appellate circuit in that period. That figure has risen recently: 15 out of 16 cases have been overturned since 2020.

Piepgrass believes the Ninth Circuit judges were aware of this trend and crafted their ruling accordingly.

“When reading the decision, it’s apparent that the Ninth Circuit had this dynamic in mind,” he said. “Judge Nelson’s opinion leans heavily on interpretive doctrines likely to appeal to the strict textualists on the Supreme Court who might review it.”

“Ultimately that may be the most interesting observation about this decision: these jurists themselves seem to believe this issue is likely to end up before the Supreme Court, and they wrote the decision with that in mind.”

Major Questions Doctrine Could Limit CFTC Power

Gaming lawyer Daniel Wallach pointed to arguments that may resonate with the conservative majority on the Supreme Court (currently 6–3, emphasizing textualism, originalism, and limits on federal administrative power). Wallach and Roth have previously presented together on prediction markets, though they sometimes disagree.

Wallach posted a detailed analysis on X, breaking the ruling into subject-matter categories including swaps, limiting principles, major-questions doctrine, Rule 40.11(a), gambling, and preemption.

He notes that the ruling says Kalshi’s definition of swaps is overly broad and lacks a limiting principle. Additionally, the major questions doctrine could restrict the CFTC’s ability to revise its own rules. That doctrine holds that if a federal agency wants to regulate an issue of vast “economic and political significance,” it must show clear and explicit authorization from Congress.

Former Senator Chris Dodd, one of the authors of the Dodd-Frank Act (which amended the CEA in 2010), has explicitly stated that Congress did not intend to authorize sports contracts. Moreover, there appears to be little current appetite in Congress to approve sports event contracts.

Many questions remain, and the Ninth Circuit ruling has far from settled the debate over whether sports event contracts are fair and legal. States have already begun citing the verdict in their own legal battles with prediction platforms.