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The Gambling Wire: Ninth Circuit Rules Against Kalshi as Gambling Loss Deduction Fix Advances

By jili tutorial · September 18, 2026

The Gambling Wire: Ninth Circuit Rules Against Kalshi as Gambling Loss Deduction Fix Advances

Overview

This week brought major developments across the gambling and prediction markets landscape. A Ninth Circuit ruling dealt another blow to Kalshi’s sports-event contracts, while a federal tax fix for gambling losses moved closer to a House vote. Meanwhile, New York reported continued growth in mobile sports betting alongside an increase in problem-gambling calls, and new enforcement actions emerged in college sports and Australia. This guide breaks down each story, offering context, analysis, and practical takeaways.

Key Developments at a Glance

Deep Dive: Ninth Circuit Sides with Tribes in Kalshi Sports Contract Case

The Ruling

On Wednesday, a three-judge panel of the Ninth Circuit Court of Appeals ruled in favor of two California Tribes—the Yocha Dehe Wintun Nation and the Rincon Band of Luiseño Indians—in their challenge to Kalshi and Robinhood. The panel reversed in part a lower-court decision that had denied a preliminary injunction.

The court found that the Tribes are likely to succeed in showing that Kalshi’s sports-event contracts constitute Class III gaming under the Indian Gaming Regulatory Act (IGRA) when entered into on Tribal lands. Class III gaming includes activities like casino-style gambling, sports betting, and other wagering forms not explicitly classified as Class I or II.

The panel directly rejected Kalshi’s attempt to distinguish event contracts from traditional sports wagers. Citing the Ninth Circuit’s recent Nevada ruling, the court wrote:

“The substance of the sports event contracts offered on Kalshi’s DCM is sports gambling, regardless of whether Kalshi calls them swaps. The only thing that changes is Kalshi’s vocabulary.”

The court also dismissed Kalshi’s argument that the Commodity Exchange Act (CEA) ‘s exclusive-jurisdiction provision displaced IGRA. The panel found that the two statutes address different questions: the CEA governs commodity derivative markets, while IGRA regulates gaming on Tribal lands. The court deemed it “implausible” that Congress intended to take “a wrecking ball to all sports gambling regulations built up over decades by federal, state, and tribal governments.”

What This Means for Kalshi

This is Kalshi’s second loss before a Ninth Circuit panel in less than three weeks. A separate panel had previously ruled against Kalshi in a Nevada case. According to gaming attorney Daniel Wallach, Kalshi is now 0-6 among judges across the two Ninth Circuit appeals. Wallach noted that this poor record further diminishes Kalshi’s prospects of securing an en banc rehearing in the Nevada case.

Importantly, Wednesday’s ruling does not immediately impose an injunction. The case is remanded to the district court for consideration of the remaining factors for a preliminary injunction. However, the panel’s strong language and finding of likely success on the merits suggest the Tribes will have a much stronger position moving forward.

Broader Implications

This decision could reverberate through pending and future Tribal challenges to sports-event contracts. If other courts adopt the Ninth Circuit’s reasoning, platforms like Kalshi and Robinhood may face increased legal exposure when offering similar products. The ruling also underscores the tension between federal commodities regulation and Tribal gaming sovereignty—a tension that may ultimately require congressional action to resolve.

Gambling Loss Deduction Fix Advances in House

Background: The 2025 Change

In 2025, Congress enacted a change that limited the deductibility of gambling losses to 90% of gambling winnings. Previously, the federal tax code allowed taxpayers to deduct gambling losses up to the amount of their winnings (i.e., 100%). This change meant that even if a gambler had no net profit for the year—because losses exactly offset winnings—they could still face taxable income due to the 90% cap.

The FULL HOUSE Act

Representative Steven Horsford (D-NV) introduced the FULL HOUSE Act (Fair and Uniform Loss Limitations for High-Stakes Wagering and Other Entries) to restore the 100% deduction. On Wednesday, the House Ways and Means Committee approved a broader tax package by a 38-5 vote that includes the FULL HOUSE Act’s provisions. The package now moves to the full House for a vote.

Key Quotes

What’s Next

If the full House passes the tax package and it clears the Senate, the change would go into effect retroactively, likely covering tax years beginning after 2024. For professional gamblers and recreational bettors with large volume, the restoration would provide significant tax relief.

New York Sports Betting: $1.3 Billion in Tax Revenue and Rising Problem-Gambling Calls

The Numbers

New York State Comptroller Thomas DiNapoli released a report titled “Sports Wagering in New York” on Wednesday. Key highlights include:

Responsible-Gambling Concerns

The report also highlighted a troubling trend: New York’s HOPEline received 2,545 calls in 2025, an 8.5% increase from 2020. This rise parallels the expansion of mobile sports betting, raising questions about whether adequate safeguards are in place.

Prediction Markets Under Scrutiny

Comptroller DiNapoli singled out the growth of prediction markets like Kalshi and Polymarket. The report found that:

These figures underscore the blurring lines between traditional sports betting and derivative trading, a theme that underpins the Ninth Circuit’s ruling.

Enforcement Actions: NCAA Show-Cause Order and Australian Penalties

Former NC A&T Coach Receives Four-Year Show-Cause Order

The NCAA Division I Committee on Infractions announced a four-year show-cause order against Patrick Herron, former assistant men’s basketball coach at North Carolina A&T. According to an agreement released by the hearing panel, Herron:

The NCAA classified Herron’s conduct as a Level I-standard violation—the most serious category. The governing body noted that his work on behalf of the bookmaker elevated the case beyond previous staff betting cases that had been treated as Level II violations. The show-cause order runs through September 2030, meaning any NCAA member school that hires Herron before then must show cause why he should be allowed to work. He would also face a 10-game suspension if employed by another NCAA institution during the third year of the order.

Dabble Fined A$1 Million Over Self-Exclusion Failures

In Australia, the Australian Communications and Media Authority (ACMA) issued penalties totaling A$1,069,200 (~$760,000) against Dabble Sports for failures related to the BetStop national self-exclusion register. Specific violations include:

This enforcement action highlights the strict regulatory environment in Australia, where regulators are increasingly focused on protecting vulnerable gamblers.

Industry Changes: Ohio Leaves NCPG and SciPlay CEO Departs

Ohio Withdraws from NCPG Over Kalshi Partnership

The Ohio Casino Control Commission has withdrawn from the National Council on Problem Gambling (NCPG) over the organization’s relationship with Kalshi. Ohio ended its membership in June, though the move became public during discussions by the Massachusetts Gaming Commission over whether it should also leave.

Ohio follows Michigan and Nevada regulators, who previously withdrew from NCPG for the same reason. The dispute centers on NCPG’s acceptance of funding from Kalshi, a platform that offers sports-event contracts that many regulators view as unlicensed sports betting. Massachusetts regulators voted last week to remain members while continuing to monitor developments.

SciPlay CEO Josh Wilson to Step Down

Light & Wonder announced that SciPlay CEO Josh Wilson will step down when his current contract expires on October 30. The company has begun searching for a successor. During the transition, Light & Wonder CFO Oliver Chow will assume executive oversight of the social casino business starting November 1, while retaining his CFO role.

Light & Wonder stated that the leadership change does not alter its strategy for SciPlay or its social casino portfolio. CEO Matt Wilson reiterated the company’s confidence in the category and its direct-to-consumer growth opportunity. However, he acknowledged pressure on SciPlay’s performance, saying in a recent quarterly earnings call: “We are not happy with the result of SciPlay and where we’re at, and we take accountability for that.”

Context and Analysis: The Bigger Picture

Tribal Gaming Rights vs. Federal Commodity Law

The Ninth Circuit’s ruling is part of a broader legal battle over where prediction markets fit in the U.S. regulatory framework. Tribes have long argued that event contracts on sports outcomes are essentially sports betting, which they have exclusive rights to operate on their lands under IGRA. Kalshi and its supporters counter that the Commodity Exchange Act gives the Commodity Futures Trading Commission (CFTC) sole jurisdiction, allowing them to offer these contracts as derivatives.

The court’s rejection of that argument suggests that—at least in the Ninth Circuit—Tribal sovereignty and gaming regulation will take precedence over the CEA when contracts are offered on Tribal lands. This could force platforms like Kalshi to either seek Tribal partnerships or restructure their offerings.

The Gambling Loss Deduction: A Bipartisan Issue

The FULL HOUSE Act enjoys broad support from both parties, particularly from representatives in states with significant gambling industries like Nevada and New Jersey. The 2025 change to 90% deductibility was widely seen as a revenue-raising measure that penalized ordinary gamblers—not just high-stakes professionals. Restoring 100% deductibility would simplify tax filing for millions of Americans who gamble recreationally and ensure they are only taxed on real net income.

Balancing Growth and Harm

New York’s report illustrates the double-edged sword of legalized sports betting. On one hand, it generates billions in revenue for state programs and creates jobs. On the other, the rise in problem-gambling calls—up 8.5% just since 2020—demands more robust consumer protections. States are grappling with how to fund treatment programs, enforce self-exclusion, and regulate advertising.

From the NCAA’s strict action against coaches who bet to Australia’s aggressive penalties for self-exclusion failures, there is a clear global trend: regulators are taking gambling integrity and consumer protection more seriously. The show-cause order for Patrick Herron sends a strong message to college athletics that betting violations will not be tolerated, even if the wagers do not involve one’s own team.

What to Watch Next

Conclusion

This week’s developments reflect a rapidly evolving landscape where legal, tax, and regulatory frameworks struggle to keep up with innovation. The Ninth Circuit’s ruling against Kalshi reaffirms Tribal sovereignty but leaves open questions about the broader legality of event contracts. The gambling loss deduction fix offers hope for fairness in tax treatment, while rising problem-gambling metrics remind us that growth must be balanced with responsibility. Enforcement actions in college sports and Australia show that regulators are watching closely—and are willing to impose significant penalties.