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    Will Prediction Markets Land at the Supreme Court? The Ninth Circuit Just Heard Arguments

    The Ninth Circuit heard oral arguments on April 16 — and judges weren't impressed. With the Third Circuit already ruling for platforms, a circuit split is forming that could send prediction market regulation to the Supreme Court.

    By PredictionMarkets.usFriday, April 17, 202612 min read

    Originally published April 17, 2026 · Updated April 22, 2026

    The most consequential legal battle in prediction market history may be heading to One First Street.

    On April 16, 2026, a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit heard consolidated oral arguments in San Francisco from three prediction market platforms — Kalshi, Crypto.com's North American Derivatives Exchange, and Robinhood Derivatives — all challenging Nevada's authority to shut down their sports event contracts under state gaming law.

    The hearing came exactly 10 days after the Third Circuit handed platforms their biggest courtroom win to date. Two federal appellate courts in the same month, considering the same fundamental question: Do states have the power to regulate federally licensed prediction markets as gambling?

    So far, the answer is splitting in opposite directions. That split is the fastest known path to U.S. Supreme Court review.

    The Core Legal Question

    Everything in the prediction market regulatory fight comes down to one provision of a 1974 statute.

    The Commodity Exchange Act (CEA) grants the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over certain financial derivatives — specifically "swaps" — traded on federally registered Designated Contract Markets (DCMs). Kalshi, Crypto.com's exchange, and Robinhood all hold CFTC licenses as DCMs.

    Their argument: sports event contracts — binary contracts that pay $1.00 if a team wins and $0.00 if it doesn't — qualify as "swaps" under the CEA's broad statutory definition. And since they're traded on CFTC-licensed exchanges, the CFTC has exclusive authority. State gaming laws can't touch them.

    Nevada's Gaming Control Board disagrees. Its argument: sports game contracts look and function exactly like sports bets. Calling them "swaps" doesn't change what they are. States have regulated gambling under traditional police powers for over a century, and Congress didn't silently strip that authority when it overhauled commodity trading law in 1974.

    Who's right determines whether prediction markets can operate in all 50 states under a single federal license — or whether they face a 50-state licensing gauntlet identical to what traditional sportsbooks navigate.

    The Third Circuit Said Yes: Federal Law Wins (April 6, 2026)

    Ten days before the Ninth Circuit argument, the U.S. Court of Appeals for the Third Circuit issued a landmark 2-1 ruling in KalshiEX LLC v. Flaherty, No. 25-1922 — the first federal appellate court in U.S. history to rule on whether the CEA preempts state gambling laws as applied to sports event contracts.

    Writing for the majority, Circuit Judge David J. Porter (joined by Chief Judge Michael A. Chagares) held that Kalshi's sports event contracts are swaps under the CEA, and that both field and conflict preemption bar New Jersey from enforcing its gambling laws against them.

    The court's key reasoning on the swap classification: the CEA's statutory definition covers any agreement "that is dependent on the occurrence, nonoccurrence, or the extent of the occurrence of any event or contingency associated with a potential financial, economic, or commercial consequence." Sports events — which directly affect broadcasters, sponsors, franchises, and advertisers — qualify. New Jersey's argument that the contracts weren't "joined or connected" to a financial instrument raised the bar "beyond what the Act requires," Porter wrote.

    On preemption, the majority found federal law occupies the entire field of trading on a CFTC-licensed DCM. Allowing New Jersey to enforce its gaming laws "would create an obstacle to executing the Act because such state enforcement would prohibit Kalshi, which operates a licensed DCM under the exclusive jurisdiction of the CFTC, from offering its sports-related event contracts in New Jersey" — precisely the state-by-state patchwork Congress enacted the CEA to prevent.

    The dissent matters, too. Circuit Judge Jane Richards Roth called the contracts "virtually indistinguishable from the betting products available on online sportsbooks, such as DraftKings and FanDuel," and labeled the majority's approach a "performative sleight." Her dissent — the roadmap every state attorney general will use going forward — argued that states retain their traditional police power over gambling and that Congress never intended Dodd-Frank's 2010 swap definition to quietly remove that authority.

    An important caveat: this was a preliminary injunction ruling, not a final merits decision. The court found Kalshi has a reasonable likelihood of success — not that it has definitively won. The underlying case returns to the district court, and New Jersey is evaluating en banc review.

    Sources: KalshiEX LLC v. Flaherty, No. 25-1922 (3d Cir. Apr. 6, 2026); Holland & Knight legal analysis, April 7, 2026; Skadden analysis, April 10, 2026

    The Ninth Circuit Heard Arguments on April 16 — And Judges Weren't Convinced

    The Ninth Circuit panel consisted of three judges appointed by President Trump: Ryan D. Nelson, Bridget S. Bade, and Kenneth K. Lee. Despite the conservative panel composition, the hearing on April 16 did not go smoothly for the prediction market platforms.

    All three judges questioned the breadth of the platforms' "swap" classification argument. Their central skepticism: if paying $1 when a sports team wins qualifies as a federally regulated swap under the CEA, where exactly does that logic stop?

    Judge Nelson was explicit. When Robinhood's counsel pressed the argument, Nelson said flatly: "I don't buy" the companies' regulatory interpretation. On Crypto.com's position, Nelson was more pointed — dismissing a core argument as "sophistry to the nth degree."

    On behalf of Kalshi, attorney Colleen Sinzdak tried to draw the court back to the practical consequence of allowing conflicting state-federal court proceedings. "I think the body of case law does demonstrate that what we really need to avoid here is having a state and a federal court considering exactly the same issue at exactly the same time and potentially reaching different outcomes," she told the panel.

    Nevada's Gaming Control Board, represented by the state attorney general's office and private counsel, argued that sports event contracts are gambling under Nevada law regardless of how the platforms label them — and that CFTC registration doesn't override the state's historic police power over gambling within its borders.

    The panel did not rule from the bench. A decision could come in weeks or months.

    Critical context: At the district court level, Nevada won all three underlying cases. All three platforms were denied preliminary injunctions by federal District Judge Andrew Gordon, who found the CEA does not displace state gaming regulation over sports-tied contracts. Crypto.com and Robinhood agreed to pull their sports contracts in Nevada pending appeal. Kalshi did not, and is currently subject to a Nevada state court temporary restraining order that has blocked its sports, election, and entertainment contracts in the state.

    Sources: Washington Examiner, April 16, 2026; Holland & Knight, April 7, 2026

    Why a Circuit Split Almost Certainly Means the Supreme Court

    Here is the scenario that legal analysts agree is forming:

    • Third Circuit (April 6): Federal preemption wins. New Jersey cannot block Kalshi. Sports event contracts are swaps.
    • Ninth Circuit (pending): Panel appeared skeptical. If the Ninth Circuit upholds Nevada — ruling that state gaming authority prevails — two federal appellate courts reach opposite conclusions on the same legal question.

    A circuit split on a constitutional question of this magnitude almost invariably triggers U.S. Supreme Court review. The Supreme Court typically steps in specifically to resolve such conflicts and provide a uniform national rule. With prediction markets now operating across all 50 states under federal licenses, the jurisdictional question isn't academic — it directly determines whether the entire industry continues to exist in its current form.

    Paul Grewal, Coinbase's chief legal officer, put it plainly after the Ninth Circuit hearing: "Questions at oral argument are not a reliable signal of how a court will rule; nonetheless, I stand by my longstanding prediction — the Supreme Court will resolve whether sports contracts on designated contract markets are swaps subject to the exclusive jurisdiction of the CFTC."

    Other circuits are also in play. The Fourth Circuit has a pending appeal from Maryland, where a federal district court denied Kalshi's preliminary injunction. The Sixth Circuit has Kalshi's appeal from Ohio, where a federal judge also sided with the state. Legal analysis from Holland & Knight notes that additional proceedings are pending in the Sixth and Fourth Circuits — meaning multiple appellate opinions are coming, all addressing the same central question.

    For those tracking the situation: a Ninth Circuit ruling against prediction markets, combined with the existing Third Circuit ruling in their favor, would constitute an explicit circuit split and would be the single clearest trigger for a Supreme Court petition.

    Sources: Holland & Knight, April 7, 2026; Paul Weiss analysis, April 6, 2026

    The State Enforcement Wave Keeps Growing

    While courts deliberate, state regulators aren't waiting. The prediction market industry is now defending on multiple fronts simultaneously:

    Nevada obtained a state court temporary restraining order in March 2026 blocking Kalshi's sports, election, and entertainment contracts. Kalshi continued operating in the state during its federal appeals, but the state court order is separately in effect.

    Arizona filed 20 misdemeanor criminal charges against Kalshi — the first criminal charges ever brought against a prediction market in U.S. history. A federal judge granted the CFTC a temporary restraining order blocking Arizona from enforcing state gaming law against Kalshi's event contracts, providing temporary relief while the federal preemption question works through appeals.

    Ohio is advancing a civil enforcement action with a significant proposed fine against Kalshi for operating without a gaming license. A federal district court judge in Ohio previously ruled that the CEA does not preempt Ohio gambling law — a direct contradiction of the Third Circuit's subsequent holding.

    Washington State filed a civil lawsuit against prediction market operators in April 2026, adding to the list of active enforcement fronts. Washington falls within the Ninth Circuit's geographic jurisdiction, meaning whatever ruling the Ninth Circuit issues will directly govern the Washington dispute.

    Kentucky enacted a law that requires sportsbooks and DFS operators holding state licenses to choose between their Kentucky licenses and any affiliation with prediction market platforms — the first state to legally force that choice on major gaming companies.

    Minnesota is advancing legislation that would make operating or advertising prediction markets a state felony, with up to five years in prison and a $10,000 fine. As of April 17, 2026, the bill has cleared committee and is advancing toward a full vote.

    The platforms' legal strategy — which relies on federal court intervention to preempt state enforcement — has had mixed results. Courts in Tennessee and New Jersey (Third Circuit) have sided with platforms. Courts in Nevada, Ohio, Massachusetts, and Maryland have sided with states. The patchwork is growing.

    Sources: CFTC Press Release 9211-26 (Arizona TRO); National Law Review, April 10, 2026

    The CFTC's Dual-Track Strategy

    The Trump administration's CFTC is fighting on two tracks simultaneously — and the tracks appear to be in tension.

    Track 1: Litigation. The CFTC filed an amicus brief in the Ninth Circuit on February 17, 2026, asserting that the CEA gives it exclusive jurisdiction over event contracts and that state gaming enforcement is preempted. The agency has also filed federal lawsuits against Arizona, Connecticut, and Illinois seeking to block state enforcement actions against prediction market platforms — the first time the federal government has directly sued states over this question. Chairman Michael S. Selig has stated plainly that it is "important that the federal regulator defend its exclusive jurisdiction over these markets."

    Track 2: Rulemaking. On March 12, 2026, the same CFTC Chairman published an Advance Notice of Proposed Rulemaking (ANPRM) in the Federal Register, seeking public comment on whether the agency should amend or create new rules governing event contracts on prediction markets. The ANPRM's comment period runs 45 days from its March 16, 2026 Federal Register publication — closing on April 30, 2026, just two weeks after the Ninth Circuit oral arguments.

    Here's the tension: the CFTC is simultaneously arguing in court that it already has clear exclusive jurisdiction while asking the public to help it figure out how to exercise that jurisdiction. As the law firm Davis Wright Tremaine noted in its analysis, the ANPRM "currently only has one commissioner (as opposed to its usual five)" — Chairman Selig — which affects its capacity to finalize any rulemaking quickly.

    The ANPRM covers significant ground: which types of event contracts may be "contrary to the public interest," how manipulation and insider trading should be addressed, whether position limits are appropriate, and how event contracts differ from other swaps and futures. Comments from platform operators, legal advocates, sports leagues, and state regulators are expected to shape whatever regulatory framework emerges.

    Chairman Selig described the ANPRM as "the process of new rulemaking grounded in a rational and coherent interpretation of the Commodity Exchange Act, while reassuring the American people that the CFTC will exercise its exclusive jurisdiction over prediction markets."

    Sources: CFTC Press Release 9194-26, March 12, 2026; Davis Wright Tremaine analysis, March 17, 2026; McDermott Will & Emery analysis, April 1, 2026

    What This Means If You Trade on Kalshi or Robinhood Today

    For US-based prediction market traders, the legal situation creates a genuine patchwork:

    If you're in Nevada: Kalshi's sports contracts, election contracts, and entertainment contracts are blocked under the Nevada state court order. Crypto.com and Robinhood voluntarily suspended sports contracts in Nevada during the appeal. Non-sports contracts on other platforms may still be available.

    If you're in New Jersey, Pennsylvania, or Delaware (Third Circuit): The Third Circuit's April 6 ruling means these states cannot block Kalshi under state gaming law while the preliminary injunction stands. Full access continues.

    If you're in Ohio: A federal court sided with the state on Kalshi's sports contracts. Kalshi is appealing to the Sixth Circuit. Sports contracts face restriction while the appeal proceeds.

    If you're in Tennessee: Kalshi holds a preliminary injunction blocking state interference. Full access continues.

    If you're in Arizona: The CFTC obtained a federal TRO blocking Arizona from enforcing criminal gaming charges against Kalshi's event contracts. That provides temporary protection while the federal case proceeds.

    If you're in most other states: Kalshi and other platforms are continuing to operate. The ongoing litigation may change that, but no active court order is currently blocking most states.

    Important note on Polymarket: Polymarket's U.S. operations are conducted through QCX LLC, a CFTC-licensed entity that became operational for US users in late 2025. As of April 2026, the U.S. platform offers sports markets only. International political markets — including election contracts — are on the global polymarket.com platform, which is not accessible to U.S. users. QCX LLC (the U.S. entity) faces the same state enforcement pressures as Kalshi.

    For the most current state-by-state platform availability, explore the platform guides at PredictionMarkets.US.

    FAQ

    What happens if the Ninth Circuit rules against prediction markets? A ruling against the platforms would create an explicit circuit split with the Third Circuit — two federal appellate courts reaching opposite conclusions on the same legal question. A circuit split of this magnitude on a question with billion-dollar industry stakes almost always produces a Supreme Court petition. If SCOTUS grants certiorari, it would issue a binding national rule resolving the dispute across all 50 states.

    What is the Third Circuit ruling's actual scope? The Third Circuit's April 6, 2026 ruling in KalshiEX LLC v. Flaherty (No. 25-1922) is a preliminary injunction decision, not a final merits ruling. The court found Kalshi has a "reasonable likelihood of success" on its preemption argument — a lower bar than a final determination. The underlying case continues in district court, and New Jersey is evaluating whether to seek en banc review before all 14 active Third Circuit judges.

    Does the CFTC's support guarantee prediction markets win? No. Courts are not required to defer to agencies on statutory interpretation since the Supreme Court ended Chevron deference in 2024 (Loper Bright Enterprises v. Raimondo). The CFTC's amicus brief carries weight, but the Ninth Circuit panel's pointed questioning suggests they are doing independent statutory analysis — and are skeptical that Congress intended Dodd-Frank's 2010 swap definition to strip states of gambling authority over sports contracts.

    Could Congress settle this instead? Yes. Multiple bills have been introduced in 2026 that would expressly address prediction market classification. The Prediction Markets Are Gambling Act (Rep. Schiff and Sen. Curtis, introduced March 2026) would amend the CEA to classify prediction markets as gambling and remove them from CFTC jurisdiction. If enacted, this would moot all pending court cases and definitively resolve the question against platforms. The bill faces a difficult path given the current administration's support for prediction markets, but its introduction signals that legislative resolution is a real possibility.

    What is the CFTC ANPRM and why does it matter? The ANPRM (Advance Notice of Proposed Rulemaking, CFTC Press Release 9194-26) is a pre-rulemaking step in which the CFTC solicits public comment on whether it should write new rules governing prediction market event contracts. Comments are due April 30, 2026. The outcome could produce formal CFTC regulations that clarify what types of event contracts are permitted — potentially including explicit rules on sports contracts that would either cement or undermine the platforms' legal position. No rules have been proposed yet; the ANPRM is the beginning of a process that typically takes 1–2 years to produce final rules.

    Conclusion

    Prediction markets are living through the most consequential regulatory month in the industry's history. Ten days ago, the Third Circuit handed platforms their first federal appellate win. On April 16, 2026, the Ninth Circuit panel appeared skeptical of the same legal argument. The resulting circuit split — if the Ninth Circuit rules for Nevada — is the clearest possible path to the U.S. Supreme Court.

    What makes this moment unusual is that the outcome isn't just about Kalshi or sports contracts. A Supreme Court ruling on whether federally licensed prediction markets are preempted from state gambling regulation would determine the entire operating structure of the industry — every platform, every contract category, every state.

    The CFTC ANPRM comment period closes April 30. The Ninth Circuit ruling could come any time in the next several months. The Third Circuit preliminary injunction continues protecting platforms in New Jersey while the underlying case proceeds. And state enforcement actions keep multiplying.

    For users and traders: check the live platform status for your state before trading. The legal map is redrawn regularly.

    Explore prediction markets across all major platforms at PredictionMarkets.US.

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