Sports Bets or Swaps? Ninth Circuit’s Controversial Kalshi Ruling Deepens the Divide

The useful part

Does federal derivatives law preempt state gaming regulations when a prediction market lists sports-related contracts as swaps? Assad, the Ninth Circuit said no, at least for now, ruling that Kalshi had not shown that the Commodity Exchange Act (CEA) likely preempts Nevada's gaming laws. The court therefore allowed Nevada to resume enforcement of its gaming laws against Kalshi's sports event contracts.

How it works

• However, the threshold question in this case was whether Kalshi's sports contracts are swaps.
• If these contracts are not swaps, it is unclear how they could lawfully trade on a DCM at all.
• Commission (CFTC or the Commission) exclusive authority over "swaps" traded on a designated contract market.
• Kalshi argued that sports outcomes carry economic consequences for broadcasters, advertisers, sponsors, franchises, and local communities.

Details worth keeping

The court does not fully address this tension.