Kalshi Loss Deepens Split Over Prediction-Market Oversight

Kalshi operates a designated contract market regulated by the Commodity Futures Trading Commission and argues that its event contracts are federally supervised derivatives rather than wagers subject to state licensing. The dispute tests where financial regulation ends and gambling oversight begins, with major implications for prediction-market operators, state consumer-protection regimes and the CFTC’s claim to exclusive jurisdiction under the Commodity Exchange Act.

On Aug. 28, 2026, a unanimous three-judge panel of the U.S. Court of Appeals for the Ninth Circuit held that Kalshi had not shown the Commodity Exchange Act was likely to preempt Nevada gaming laws. The court affirmed the dissolution of an injunction covering sports-event contracts and sent questions involving election contracts back to the district court. No monetary damages were awarded. The decision conflicts with the Third Circuit’s approach, prompting the CFTC to signal a potential Supreme Court fight.

Kalshi is a CFTC-registered designated contract market that lets users trade event contracts tied to sports, elections and other outcomes. Its legal strategy rests on federal pre-emption: the company argues the Commodity Exchange Act gives the Commodity Futures Trading Commission exclusive authority over its exchange, while states contend much of the activity is gambling subject to local licensing and consumer-protection laws. The outcome will determine whether prediction markets can operate under one national framework or face a state-by-state patchwork.

On Aug. 13, King County Superior Court Judge John McHale ordered Kalshi to block Washington users from most contracts, requiring initial IP and residency geofencing by Aug. 19 and a multi-source system by Sept. 2. Kalshi sought reconsideration on Aug. 20, citing Washington’s decision not to enforce equivalent restrictions against Crypto.com pending appeal. Separately, 44 state attorneys general challenged the CFTC’s 267-page proposed rule after comments closed July 27. The CFTC invoked emergency authority on Aug. 11 to keep Kalshi operating amid New York’s July 31 suit, which seeks more than $36 billion in damages.

Kalshi lets users trade event contracts tied to sports, elections and other outcomes, arguing that its status as a designated contract market overseen by the U.S. Commodity Futures Trading Commission puts it under federal commodities law rather than state gambling regimes. The stakes extend across the fast-growing prediction-market industry: Kalshi recorded $33 billion in volume in June 2026, compared with a combined $13.95 billion for Polymarket and its U.S. platform.

King County Superior Court Judge John McHale on July 20, 2026, granted the Washington Attorney General’s Office a preliminary injunction, finding the state was likely to prove Kalshi violated the Washington Gambling Act and Consumer Protection Act. He also rejected Kalshi’s argument that the federal Commodity Exchange Act preempts state law. The court will review further submissions by Aug. 3, with the order set to take effect no earlier than Aug. 5 and temporarily bar sports-related event contracts in Washington.

Kalshi is a Commodity Futures Trading Commission-regulated designated contract market where users trade yes-or-no event contracts that settle at a maximum of $1. The New York State Gaming Commission argues that sports contracts constitute gambling subject to state law. The dispute centers on whether the federal Commodity Exchange Act preempts state enforcement and could also affect the platform’s cost of operating across state lines.

On July 7, 2026, U.S. District Judge Analisa Torres of the Southern District of New York denied Kalshi’s motion for a preliminary injunction. She found that the company had not sufficiently shown that federal law preempted New York’s gambling laws and that the associated compliance costs did not constitute irreparable harm. Kalshi filed a notice of appeal the same day, and the case entered the U.S. Court of Appeals for the Second Circuit on July 8 under docket number 26-1835.

Kalshi offers event contracts as a designated contract market regulated by the US Commodity Futures Trading Commission (CFTC). The central legal question is whether contracts allowing users to trade on outcomes are federally regulated derivatives or sports betting products subject to state oversight. The rulings will determine whether prediction markets can operate nationwide.

In early July 2026, Kalshi failed to secure a Nevada Supreme Court stay of an order blocking trading in the state, while a Michigan court issued a separate two-week temporary restraining order. The company also sued Ohio regulators and mounted a legal defense in Minnesota. North Carolina’s proposed budget would impose a 6% tax on related revenue, while Kalshi’s deadline to appeal in New Jersey was extended to August 4.

Kalshi is a designated contract market regulated by the U.S. Commodity Futures Trading Commission (CFTC) that offers event contracts tied to outcomes including sports results. The Ohio Casino Control Commission considers such products to be sports betting that requires a license, prompting Kalshi to sue in October 2025. The dispute centers on whether federal derivatives regulation preempts state intervention, and its outcome could also affect platforms such as Polymarket.

On May 12, 2026, the CFTC filed an amicus brief with the U.S. Court of Appeals for the Sixth Circuit supporting Kalshi’s challenge to a federal district court’s March 2026 denial of an injunction. The CFTC called Ohio’s action a “jurisdictional overreach” and asked the court to affirm its exclusive authority over event contracts offered on designated contract markets. The filing marks the agency’s second intervention in a similar case, following its support for Crypto.com in the Ninth Circuit in February.

Event contracts allow investors to wager money on outcomes such as elections or sporting events. Kalshi, Robinhood and others argue that the contracts are derivatives under the Commodity Exchange Act and fall under the exclusive jurisdiction of the US Commodity Futures Trading Commission. States consider them unlicensed gambling. How courts draw the regulatory boundary will determine whether the platforms can operate across state lines.

On April 2, 2026, the CFTC filed separate lawsuits against Arizona, Connecticut and Illinois, asking the courts to declare that federal law preempts state gambling laws and to permanently bar state enforcement. It did not seek monetary damages. All three states had issued cease-and-desist orders, while Arizona also filed criminal charges. A federal court stayed Arizona’s prosecution on April 10.

Kalshi is a designated contract market regulated by the US Commodity Futures Trading Commission, allowing users to trade event contracts tied to outcomes including sports results. Each contract settles at a maximum of $1. New Jersey's Division of Gaming Enforcement classified the activity as unlicensed sports betting, raising the question of whether federal derivatives regulation preempts state law.

On April 6, 2026, the US Court of Appeals for the Third Circuit voted 2–1 to uphold a preliminary injunction issued on April 28, 2025. The court found that sports event contracts are swaps under the Commodity Exchange Act and fall under the CFTC's exclusive jurisdiction. On June 26, the state separately requested an extension until September 4 to file a petition for a writ of certiorari with the Supreme Court.

Kalshi is a designated contract market regulated by the US Commodity Futures Trading Commission, or CFTC, and argues that event contracts tied to sports, elections and other outcomes are swaps governed by the federal Commodity Exchange Act. The Nevada Gaming Control Board contends that Kalshi is offering gambling without a license. The dispute centers on whether the CFTC’s exclusive jurisdiction preempts state gaming laws and could determine whether prediction markets can operate under uniform nationwide rules.

On March 19, 2026, the US Court of Appeals for the Ninth Circuit denied Kalshi’s request for an emergency administrative stay, leaving intact a March 2 order returning the case to state court. On March 20, Nevada First Judicial District Court Judge Jason Woodbury issued a 14-day temporary restraining order. He extended it on April 3, finding that an event contract was functionally similar to gambling by comparing it with an identical $100 wager on a baseball game.

Prediction markets such as Kalshi and Polymarket allow users to trade on the outcomes of political, sporting and other events, but it remains unsettled whether their contracts constitute gambling or financial hedging instruments governed by federal commodities law. The dispute will shape the jurisdictional boundary between the CFTC and state gambling regulators, as well as platforms’ ability to operate across state lines.

As of July 19, 2026, prediction-market operators faced about 20 lawsuits, with 11 states having taken legal action. The CFTC asserted full jurisdiction over the contracts, but Kalshi lost an Ohio case involving sports betting. Users could therefore face state-specific restrictions, account compliance requirements and cross-border trading risks.