Ninth Circuit Rules Kalshi Sports Contracts Are Not Swaps
The Ninth Circuit ruled Friday that Kalshi sports event contracts are not swaps under the Commodity Exchange Act, clearing the way for Nevada to enforce its gaming laws against the prediction market, according to The Defiant. The decision turns on a critical jurisdictional question. If the contracts are swaps, the Commodity Futures Trading Commission holds exclusive jurisdiction over them and states are locked out. The opinion in KalshiEX LLC v. Assad concludes they are not swaps, meaning Nevada gaming regulations apply. Kalshi now faces state gaming enforcement in Nevada while the identical product remains federally shielded in New Jersey, where the Third Circuit ruled the opposite way in April.
The Commodity Exchange Act defines a swap to include an agreement dependent on the occurrence, nonoccurrence, or the extent of the occurrence of an event. Kalshi argued its sports contracts fit this definition, which would place them under exclusive federal oversight and outside Nevada jurisdiction. The panel rejected that reading. Judge Ryan Nelson wrote that whether the Super Bowl happens is the occurrence of an event, whereas whether a particular team wins is the outcome of an event. The panel added that Kalshi’s broad interpretation knows no limiting principle because anything could be defined as an event.
Nobody disputed that the contracts trade on a designated contract market, but the court held that they still do not qualify as swaps. Judges Ryan Nelson, Bridget Bade, and Kenneth Lee heard the case, with Lee filing a concurrence. The ruling affirms the dissolution of Kalshi’s Nevada injunction after finding no likely federal preemption, reaching a preliminary conclusion that directly conflicts with the Third Circuit stance.
Based on reporting by thedefiant.io.
