The slow-motion legal collision we have tracked for months just sped up. Two things happened in quick succession: a federal appeals court dealt Kalshi its most significant loss yet, and New Jersey formally asked the US Supreme Court to take the case. Between them, they turn the prediction-market question from a scattered set of state fights into a single national one headed for the highest court. The details here come from the court rulings, the New Jersey petition, and reporting by ESPN, CNBC, Sportico, and others.
The Ninth Circuit sides with the states
On August 28, the US Court of Appeals for the Ninth Circuit ruled 3-0 in favor of Nevada, upholding the state's power to regulate Kalshi's sports-event contracts as gambling. The panel rejected the industry's central argument outright: it held that these contracts are likely sports bets, not the federally regulated swaps that Kalshi says they are, and therefore the Commodity Exchange Act does not preempt Nevada's gaming laws. The ruling reaches Crypto.com and Robinhood as well, and it dissolved the injunction that had been shielding Kalshi from Nevada's regulators.
That is a near-mirror of the reasoning a federal judge in Connecticut used against Kalshi earlier, but now it carries the weight of a full appeals court. It also lands amid a wave of state pressure: Michigan just got Robinhood to stop offering new sports event contracts and wind down open positions by October 9, and the CFTC has counter-sued roughly nine states to defend its claim of exclusive authority. The two sides are now suing each other in every direction at once.
A textbook circuit split
Here is why the Ninth Circuit ruling matters beyond Nevada. Back in April, the Third Circuit went the other way, siding with Kalshi in New Jersey's case and holding that sports event contracts are swaps that federal law regulates, preempting state gambling rules. So two federal appeals courts have now looked at the same question and reached opposite answers. A split like that between circuits is the single most reliable reason the Supreme Court agrees to hear a case, because it means the law effectively differs depending on which part of the country you are in.
New Jersey asks the Supreme Court to decide
New Jersey did not wait. On September 2, state Attorney General Jennifer Davenport filed a petition asking the Supreme Court to review the Third Circuit decision that went against the state, in the case docketed as Flaherty v. KalshiEX. The question it puts to the justices is narrow and decisive: whether the Dodd-Frank financial-reform law lets the CFTC's oversight of these contracts override a state's power to regulate sports betting inside its own borders. A petition is not a guarantee the Court takes the case, but a clean circuit split plus a state attorney general pressing the issue is about as strong a setup as these petitions get.
Our take
We have said for months that this was heading to the Supreme Court, and now the machinery is actually in motion. The Ninth Circuit ruling is the turning point: until this summer, Kalshi's biggest wins came at the appeals level (the Third Circuit) while the losses were mostly district courts. Now an appeals court has squarely rejected the swap theory, which both evens the legal scoreboard and creates the split that makes review likely. This is no longer a question of whether the highest court weighs in, but when.
For bettors, the practical reality is unchanged but the stakes are clearer than ever. Prediction-market sports contracts still operate in a contested space, legal by federal registration but under active challenge state by state, and where you live increasingly determines what you can actually access, as Robinhood's Michigan wind-down shows. If the Supreme Court takes the case, its answer will reshape the entire category, either cementing a nationwide, CFTC-regulated lane that bypasses state sportsbooks, or handing the states the power to treat these contracts as the bets a growing number of judges say they are. We have followed this from the congressional hearing and the Connecticut ruling to the wave of state lawsuits, and this is the moment it all converges.