Is Kalshi legal? Swap in New Jersey, gambling in Nevada

The same contract is either a federal financial product or a bet subject to state law depending on which side of an invisible line the buyer stands. On April 6, 2026, the federal Third Circuit wrote that KalshiEX sports contracts "are swaps under the Act." One hundred and forty-four days later, on August 28, the Ninth Circuit wrote that those same contracts "are likely not swaps." Both courts were applying the same subsection —7 U.S.C. § 1a(47)(A)(ii), the definition of a swap that the Commodity Exchange Act uses to divide jurisdiction between the CFTC (Commodity Futures Trading Commission, the federal derivatives regulator) and the fifty states— and they came out through opposite doors. The effect is geographical and immediate: in New Jersey, the platform operates protected by a confirmed preliminary injunction; in Nevada, the gaming regulator can once again enforce its law; and in New York, the product remains live due to a CFTC emergency order that provides no cover outside that state. On September 2, one day before their deadline expired, New Jersey filed a petition for certiorari —a request for the Supreme Court to agree to review a case— so that it may decide who regulates these contracts: 332 pages that quantify the disorder at 39 lawsuits spread across 20 states and an 18-to-4 split among lower court rulings. This article reads both opinions side-by-side, reconstructs what currently governs in each court that has already ruled, and marks the dates that could shift the map before the end of 2026.

What did the Ninth Circuit's August 28 ruling change for Kalshi?

The Ninth Circuit resolved the case KalshiEX, LLC v. Assad, number 25-7516, heard in San Francisco on April 16, 2026, and published on August 28. The resolution partially confirms the Nevada federal court's decision that had dissolved Kalshi's preliminary injunction: the Nevada Gaming Control Board regains the ability to apply its state regulations to sports event contracts. The Board itself published a note that same day placing the scope of the ruling over three prediction markets —Kalshi, Crypto.com, and Robinhood— and reminding that it considers such activity subject to licensing under sections 463.0193 and 463.01962 of Nevada law.

Two of Kalshi's operational arguments fell by the wayside, and these are the ones that most affect those with funds on the platform. First: the platform alleged that blocking Nevada residents would cause it to violate the "impartial access" principle that the CFTC requires of designated contract markets (17 C.F.R. § 38.151(b)). The court responded that other entities regulated in Nevada already use geolocation and that Kalshi "could do the same; it simply refuses." Second: Kalshi maintained that the costs of geolocating and closing positions in Nevada constituted irreparable harm. The court dismissed this —"it is unlikely that geolocation costs would be too expensive for a company of Kalshi's size"— and added that the remaining harms are speculative or self-inflicted.

The reasoning begins with the marketing material. The opinion opens by citing the platform's own advertising, which billed itself as "the first app for legal sports betting in all fifty states." A Kalshi spokesperson told the specialized press that the company "will seek further review" and continues to believe that CFTC rules, as written, do not prohibit sports contracts.

Why do the Third and Ninth Circuits read the same swap definition in reverse?

The phrase in dispute fits into two lines. § 1a(47)(A)(ii) defines a swap as any agreement whose payment "is dependent upon the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence." The two rulings clash over two expressions: what constitutes an "event" and what "associated with" means.

The Third Circuit ruled based on a literal reading and in a single page. It notes that the legal definition is broad, observes that the dissent itself admits that "a plain reading of the Act's text suggests that Kalshi's sports contracts fit comfortably within the statutory definition," notes that the outcome of a game "certainly can be associated with a potential financial, economic, or commercial consequence" —sponsors, advertisers, television networks, franchises, local communities— and concludes: "the analysis need go no further."

The Ninth Circuit takes exactly the opposite path. It accepts that, if one sticks to the dictionaries cited by Kalshi and reads the word in isolation, the broad interpretation is defensible —and points out that this is the superficial appeal that "the Third Circuit majority adopted." However, because the legal definition itself uses "event" and "occurrence" in the same sentence, giving both the same meaning would leave one of the two hollow. Hence the pivot: if the law asks about the occurrence of an event, the event is the Super Bowl being played, not who wins it. Defining "event" as "outcome," the court notes citing dictionaries, is an archaic usage.

Regarding "associated with," the Ninth Circuit adopts the lower court's reading: the economic consequence must be inherent to the contract, not just any remote downstream financial effect. With the opposite criterion, it writes, the definition of a swap "would be so broad as to be rendered meaningless." And it throws the Third Circuit's own example back at it: the New Jersey majority had dismissed the idea that under its reading "bingo games and ping-pong matches" would end up under federal jurisdiction; the Ninth Circuit retorts that Kalshi already offers contracts on TT Elite Series table tennis matches, so the scenario "is not far-fetched," and the Arizona appeal 26-2978 is pending before that same circuit with the doctrine already established.

The Third Circuit mentions § 40.11 six times in its 41 pages; the Ninth, 26 times in its 50. This count is our own calculation based on the PDFs published by both courts and illustrates where the real disagreement lies. The Third Circuit treats the regulation as a button the CFTC has not pressed; the Ninth treats it as the rule that decides the case. In its harshest section, the Ninth writes that "our sister court essentially ignored" the § 40.11 prohibition on listing transactions related to gaming. And it adds the fact that closes the circle: the CFTC never actually activated the ninety-day review of § 40.11(c) for those contracts, according to its own letter 25-36 of September 30, 2025, so the prohibition in paragraph (a) continued to apply without formal exception.

That regulation also supports one of the three votes in the ruling. Judge Lee, concurring separately, ties his agreement to a condition he writes out in plain English: "17 C.F.R. § 40.11 prohibits gaming contracts today," and for that reason, he considers it unnecessary to resolve whether "perhaps some singular sports events could be part of a swap transaction if they meet statutory requirements." The reservation has a date: § 40.11 is subject to a reform proposal published on June 12, 2026.

What governs for Kalshi in each state as of September 2026?

Federal circuits are not legal abstractions: they are maps. The Third Circuit covers Delaware, New Jersey, Pennsylvania, and the Virgin Islands. The Ninth covers Alaska, Arizona, California, Guam, Hawaii, Idaho, Montana, Nevada, the Northern Mariana Islands, Oregon, and Washington. The Second covers Connecticut, New York, and Vermont. The Sixth, Kentucky, Michigan, Ohio, and Tennessee. The Fourth includes Maryland. Each of these blocks currently has a different answer to the same question.

The following table reconstructs the status of the proceedings as they appear in the rulings themselves. The primary source is footnote 2 of the Ninth Circuit opinion, which lists parallel cases and their outcomes with full citations.

Arizona deserves a separate reading. The state's federal court granted Kalshi a preliminary injunction on May 5, 2026, and the counterparty appealed six days later to the Ninth Circuit, case number 26-2978. That appeal is pending before the same court that just decided Assad, and with the same doctrine applicable. It remains our inference, marked as such: the protection currently enjoyed by sports contracts in Arizona is unlikely to survive its own appeal.

A second map must be overlaid on the judicial one: that of the lawsuits initiated by the CFTC itself. In its August 11 release, the Commission details that it has sued nine states —Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin— and has filed amicus curiae briefs before the Sixth and Ninth Circuits and the Massachusetts Supreme Judicial Court. That figure comes from the regulator, not a press count: nine states, spread across five different circuits.

Does the CFTC emergency order protect outside of New York?

On July 31, 2026, at 12:01 AM, New York Attorney General Letitia James filed a lawsuit against KalshiEX in New York County State Court. She sought a temporary restraining order to prevent the platform from offering contracts "relating to sports, culture, elections, and other events" "within or from New York or to persons in New York," plus the disgorgement of all profits obtained from event contracts, a penalty of triple those profits, and, as compensatory damages, $36 billion "at a minimum, pending accounting." The CFTC order itself notes that Kalshi's recognized public valuation is $22 billion: the claim is equivalent to 1.6 times the company's declared value.

The following day, Kalshi notified the CFTC of a market emergency. On August 11, the Commission invoked section 8a(9) of the Commodity Exchange Act —the provision that allows it to order a registered entity "to take such action as in the Commission's judgment is necessary to maintain or restore a fair and orderly market"— and ordered the platform to continue operating in accordance with the Act's Core Principles. CFTC Chairman Michael S. Selig explained it bluntly: "Congress did not intend for derivatives exchanges to be regulated under a patchwork of state gaming laws."

Now for the part that changes the reading of the map. The order responds to a specific action by a specific state and rests on the premise that event contracts are swaps subject to exclusive federal jurisdiction, which is exactly what the Ninth Circuit just denied in its territory. The order itself also reminds that judicial review of it belongs "solely to the court of appeals for the circuit in which the party resides or has its principal place of business, or to the District of Columbia Circuit": New York is in the Second Circuit. An emergency order issued to neutralize a New York lawsuit does not create protection in Nevada nor does it bind the court in Arizona.

That this is not theoretical is proven by the Michigan episode. A state court ordered that certain already-executed trades by residents of that state be voided, canceled, and refunded. Kalshi filed an emergency rule amendment to comply; on July 14, 2026, the CFTC suspended that amendment and, in the same act, ordered the platform to execute open trades according to its normal practices. Selig described it as "an unprecedented step that risks a cascading effect on the entire market." The relevant detail for anyone with money inside is that the fate of an already-executed position depended on which order carried more weight, and that clash was resolved via emergency measures rather than a ruling.

Michigan moved again seven weeks later, and in the opposite direction of the CFTC. On September 1, 2026, Judge Rosemarie E. Aquilina of the Ingham County Circuit Court signed a preliminary injunction requiring Kalshi to keep access blocked for state residents to its sports contracts and to do so using a geolocation provider licensed by the Michigan Gaming Control Board. Attorney General Dana Nessel announced it on September 2. The order turns the June temporary restriction into a preliminary injunction and raises the penalty for non-compliance to $500,000 for each day the court finds the platform has failed to comply. It is issued within the lawsuit Nessel filed in March 2026 under the state's Lawful Sports Betting Act, and comes after Kalshi attempted to move the matter to federal jurisdiction: the U.S. District Court for the Western District of Michigan rejected the removal and remanded the case to state court. The detail matters because it explains how these lawsuits are lost before discussing the merits: if the case stays in state court, the Third Circuit doctrine never gets applied.

What happens to the Kalshi election contracts that the Ninth Circuit remanded?

The Ninth Circuit's August 28 ruling did not close the case. It confirmed in part and remanded in part. Textually, the last line of the ruling is "affirmed in part and remanded in part," and the mandate to the district court is to examine "Nevada's challenges to Kalshi's election contracts in accordance with this opinion."

The distinction matters because the court's reasoning is built on a specific characteristic of sports contracts: that the payment depends on the outcome of a game and that this outcome has no inherent economic consequence. Election contracts do not automatically fit that mold —the outcome of an election does carry economic consequences in a much less debatable way— and the court itself declined to rule on them.

Translated into consequences: the August 28 ruling reduces the perimeter of Nevada's victory to sports and leaves open the question regarding the part of the catalog that the CFTC itself uses as an example of economic utility. In its emergency order, the Commission listed contracts that in its view serve to manage real risk: FOMC interest rate decisions, traffic normalization in the Strait of Hormuz, the price of a crypto asset, state droughts, entering a recession. None of these are sports-related, and that half of the catalog returns to the Nevada district court without an appellate criterion to cover it.

What has New Jersey asked the Supreme Court regarding Kalshi?

On September 2, 2026, with one day to spare on the deadline that Supreme Court Justice Samuel Alito had extended until the 3rd, New Jersey filed its petition for certiorari. It is 332 pages signed by Attorney General Jennifer Davenport and Mary Jo Flaherty, acting director of the Division of Gaming Enforcement, with the state's Solicitor General, Jeremy Feigenbaum, as counsel of record. The question they submit fits into one sentence: "whether the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 displaced the states from regulating sports betting occurring within their jurisdiction when such bets are offered on markets registered with the Commodity Futures Trading Commission." The matter has been filed under the caption Flaherty v. KalshiEX; the copy still records "No. 26-___" on the cover because the specific docket number is assigned upon registration and was not listed as of September 3.

The petition does not come to argue the merits of a single ruling: it comes to document disorder. Its first section is titled, literally, "the question presented has generated a direct and recognized split," and backs that claim with a count that until now was spread across two dozen dockets. Footnote 1 lists 39 lawsuits spread across 20 states, by name and number, including lawsuits by platforms, lawsuits by states, and lawsuits by the CFTC itself. The second data point is even more telling: in more than twenty resolutions issued by federal district courts and state courts, the split is 18 to 4 against Kalshi's thesis. Both lists are in footnotes 2 and 3, with full citations, and can be counted one by one: eighteen resolutions on the states' side, and on the side of the platforms and the federal regulator, the three identified in footnote 2 —Minnesota in July, Arizona in May, and Tennessee in February— to which the petition's count adds a fourth resolution that the note does not identify; presumably the New Jersey lower court resolution itself that originated this appeal, although the brief does not say so and the attribution is our inference. In the lower courts, therefore, the Third Circuit's reading is losing 18 to 4.

The two figures in the middle of the table explain why the lawsuit is not an academic debate over the meaning of a word. The Ninth Circuit notes in its opinion that more than 90% of Kalshi's trades in 2025 and 95% of its revenue were sports-related, adding plainly that "this business strategy does not affect our duty to say what the law is." What reaches the Supreme Court, therefore, affects 95 out of every 100 dollars the platform earned in 2025. Opposite this, the petition places the $16.89 billion that sports betting generated in 2025 for the states —an AGA figure, excluding tribal casinos— as the industry whose jurisdiction is at stake.

The brief also includes an argument that until now circulated in dissenting opinions and is here formulated as a practical consequence. If sports contracts are swaps, and the law generally prohibits entering into a swap outside of a designated market (7 U.S.C. § 2(e)), then —a direct quote from the Ninth Circuit that the petition adopts— "every person who places a sports bet at Caesar's Sportsbook is violating" the Commodity Exchange Act. It is the reduction to absurdity that turns a Kalshi victory into a problem for licensed casinos, and it is the reason why 44 states, in addition to tribes, casinos, and public officials, have already weighed in on the conflict —via lawsuit, amicus curiae brief, or comment in the CFTC regulatory consultation— on a matter that nominally concerns derivatives.

Kalshi responded the same day through a spokesperson, Dani Lever, with a sentence that summarizes its position from the start: "Kalshi is a nationwide, open financial market. It cannot be regulated by fifty different regulators." What comes next is procedural: the Supreme Court has not decided whether to accept the case, the opposing party has time to object, and the justices' conference is the preliminary filter. None of this suspends any of the orders currently in effect in the states in the meantime.

What remains to be decided regarding Kalshi before the end of 2026?

The full chronology explains why the conflict reached this point and which levers remain active.

With the petition filed, three levers remain, and none now depend on New Jersey's schedule. The first is procedural: Kalshi has announced it will seek further review of the Ninth Circuit ruling, which allows for two paths —en banc review by the circuit itself or an appeal to the Supreme Court. The second is regulatory: the project published on June 12 in the Federal Register would reform § 40.11 and introduce an Appendix F with criteria on what it means for a contract to "involve" an enumerated activity and what "gaming" means. The comment period closed on July 27, and there is no final rule. If it arrives and defines those terms, Judge Lee's reservation ceases to be hypothetical. The third is judicial and distributed: the Maryland appeal in the Fourth Circuit, those of Ohio and Tennessee in the Sixth —where the CFTC has already filed a brief— and the pending matter before the Massachusetts Supreme Judicial Court.

What can be evaluated following the Ninth Circuit ruling and the Supreme Court petition?

Until August 28, anyone trading event contracts could rely on a reasonable reading: there was a favorable appellate ruling, a federal regulator defending exclusive jurisdiction, and a series of scattered lower court resolutions. Now there are two appellate rulings with opposite findings on the same legal text, and that turns the question "is this legal?" into a question involving a zip code.

Five things can now be verified independently.

1. Which circuit the applicable jurisdiction falls under for each case, because the answer changes the regime, and the four tables above provide the starting point.
2. That the federal protection deployed by the CFTC has come in the form of emergency orders directed at specific episodes —Michigan in July, New York in August— with a scope of review limited to the circuit of the party's domicile.
3. That the line between sports contracts and the rest of the catalog has just been drawn by a court that declined to rule on the election half, and that piece returns to the Nevada court.
4. That the argument relied upon by the three Ninth Circuit judges —regulation § 40.11 as written today— has a reform proposal with the comment period closed since July 27.
5. How lower court resolutions are split: 18 against Kalshi's thesis and 4 in favor, with the list of cases attached to the petition to contrast them one by one.

The September 2 petition opens a path but sets no date, as the Supreme Court first decides whether to accept the case. Until it does —or until the CFTC publishes a final rule that both circuits accept as determinative— the map continues to be drawn by state orders like Michigan's on September 1 and federal emergency orders like New York's on August 11, each valid where it reaches. The same contract will continue to have two legal natures and a single purchase screen.

Sources and links: Ninth Circuit, KalshiEX v. Assad, No. 25-7516 (PDF) · Third Circuit, KalshiEX v. Flaherty, No. 25-1922 (PDF) · Supreme Court, Docket 25A1465 · Flaherty v. KalshiEX, Petition for Writ of Certiorari Sep-2-2026 (PDF, 332 pp.) · New Jersey Attorney General's Office, Note of Sep-2-2026 · The Block, Michigan Injunction (Sep-3-2026) · Michigan Advance, Nessel wins injunction against Kalshi · CFTC, Release 9281-26 (Aug-11-2026) · CFTC, Market Emergency Declaration Order (PDF) · CFTC, Release 9267-26 (Jul-14-2026) · Federal Register, 91 FR 35806 · Nevada Gaming Control Board, Note of Aug-28-2026 (PDF)