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Ninth Circuit Sends Kalshi Election Contract Question Back to District Court

By jili tutorial · September 1, 2026

Ninth Circuit Sends Kalshi Election Contract Question Back to District Court

Kalshi lost its latest legal battle over sports event contracts in Nevada, but the appeals court left a key question on election markets unresolved. The Ninth Circuit’s ruling against Kalshi on sports contracts could have significant implications for similar prediction markets, yet it also raised a separate issue: whether federal law prevents Nevada from regulating election contracts.

A three-judge panel sided with Nevada on Friday regarding Kalshi’s sports contracts. The court concluded that the Commodity Exchange Act (CEA) likely does not preempt state gambling laws as applied to those markets. However, the panel separately remanded the election-contract issue back to the district court for further analysis.

What the Ninth Circuit Decided

Judge Ryan Nelson, writing for the panel, explained the reasoning for the partial remand. Because the district court did not analyze whether Kalshi’s election contracts—which are illegal under Nevada law and represent only a fraction of Kalshi’s business—fit within the CEA’s definition of a swap, the appeals court directed the lower court to consider that question in the first instance.

Kalshi is already blocked from offering election contracts in Nevada under a state court injunction and has geofenced the state. The remaining legal question is whether Nevada’s regulation of those markets is ultimately preempted by federal commodities law.

Kalshi began offering election event contracts in June 2023. Nevada’s March 2025 cease-and-desist order targeted both its sports and election markets.

Election Contracts Face a Separate Test

The Ninth Circuit agreed that the CEA expressly preempts state regulation of qualifying “swaps” traded or executed on a federally regulated designated contract market. It then upheld U.S. District Judge Andrew Gordon’s conclusion that Kalshi’s sports event contracts do not fit that definition.

Gordon’s November ruling focused on sports contracts and did not separately apply the swap analysis to Kalshi’s election markets. The Ninth Circuit has now directed him to do so.

Under the CEA, the swap definition includes certain transactions dependent on an event or contingency associated with a potential financial, economic, or commercial consequence. The appeals court did not express a view on whether Kalshi’s election contracts satisfy that definition. That leaves Kalshi with a narrower path to argue that federal law protects its political markets from state regulation.

On sports contracts, the ruling also creates a split with the Third Circuit, which earlier this year sided with Kalshi in its New Jersey sports-contract litigation.

Election Contracts Also Draw Scrutiny in Other States

While sports event contracts remain the focus of most prediction market litigation, election contracts are increasingly drawing attention from regulators and lawmakers.

Washington, which is also within the Ninth Circuit, has already obtained a state-court injunction covering Kalshi’s election and political contracts. On Aug. 20, Kalshi restricted access to sports, elections, politics, culture, technology, science, and mentions markets in the state as it implemented the court-ordered geofencing requirements.

Arizona filed criminal charges against Kalshi, including four election-wagering counts involving the 2028 presidential election and several 2026 state races. A federal court subsequently blocked Arizona from enforcing its gambling laws against Kalshi while the litigation proceeds.

Meanwhile, Minnesota enacted a law prohibiting prediction markets, including those tied to political events. Shortly after its passage, the CFTC, Kalshi, and Polymarket sued to block enforcement of the new law. A federal judge later granted the CFTC preliminary relief. U.S. District Judge Katherine Menendez found that the CEA likely preempts the law with respect to a substantial portion of event contracts.

Wisconsin has taken a different approach. The Wisconsin Elections Commission warned in July that residents who trade election prediction contracts and then vote in the same election could face felony charges. The commission concluded that election contracts offered by platforms including Kalshi and Polymarket likely constitute a “bet or wager” under state election law.

New York’s latest enforcement action is broader but also reaches political markets. The state seeks to prevent Kalshi from offering event contracts without a gaming license, with its requested relief encompassing contracts related to sports, culture, elections, and other events.