Prediction markets and the Supreme Court: what the split means

On August 28 a federal appeals court told Kalshi that its sports event contracts are not the thing the company says they are. Five days later New Jersey asked the Supreme Court to settle the question for the whole country. If you trade event contracts, or you are just trying to work out whether these platforms are reachable from your state, this is the week the argument stopped being theoretical.

What actually happened

The Ninth Circuit ruled against Kalshi. In KalshiEX, LLC v. Assad, No. 25-7516, argued in April and filed on August 28, 2026, a panel of Judges Ryan D. Nelson, Bridget S. Bade and Kenneth K. Lee affirmed the dissolution of Kalshi's preliminary injunction against Nevada.

The holding is technical and it matters. The panel concluded that sports event contracts listed on Kalshi's designated contract market are not "swaps" as the Commodity Exchange Act defines them. Because they are not swaps, the CEA's preemption of state law does not reach them. In the opinion's words, "The CEA likely does not preempt Nevada's gaming regulations as applied to Kalshi's sports event contracts." The panel added that "Congress did not take a wrecking ball to all sports gambling regulations built up over decades by federal, state, and tribal governments when it amended the CEA."

It disagreed with another circuit on purpose. The opinion takes direct aim at the Third Circuit's decision in KalshiEX v. Flaherty, 172 F.4th 220 (3d Cir. 2026), which had gone the other way and granted Kalshi its injunction against New Jersey. The Ninth Circuit criticized what it called that court's literalist approach to textualism and rejected its conclusion that sports event contracts are swaps. That is a circuit split, stated out loud, on a question of federal preemption.

New Jersey took it to the Supreme Court. The Supreme Court's docket in 25A1465 shows Justice Alito twice extended New Jersey's deadline to petition, first to August 4 and then to September 3, 2026, with Jeremy M. Feigenbaum of the New Jersey Attorney General's office as counsel of record. New Jersey filed inside that window, on September 2 according to contemporaneous reporting. The question it puts to the Court is whether federal commodities law, as amended by Dodd-Frank, strips states of the power to regulate sports contracts sold to their own residents on a CFTC-registered exchange.

And a third court weighed in this week. On September 8 the Tenth Circuit denied Kalshi's motion for an emergency injunction pending appeal in its dispute with Utah, which leaves Utah free to enforce its own laws while the appeal proceeds. SBC Americas reported the panel writing that "Kalshi has not shown these factors weigh in its favor." The underlying appeal has not been decided.

Three courts, three postures

| Court | State in the case | What it decided | Status now | | --- | --- | --- | --- | | Third Circuit, Flaherty, 172 F.4th 220 (2026) | New Jersey | Federal law preempts state gaming law for these contracts | Under a cert petition at the Supreme Court | | Ninth Circuit, Assad, No. 25-7516 (Aug 28, 2026) | Nevada | Contracts are not swaps, so no preemption of Nevada's rules | Panel decision, further review possible | | Tenth Circuit (Sep 8, 2026) | Utah | Declined to pause Utah's enforcement during the appeal | Merits appeal still pending |

What this does not mean

It does not mean prediction markets are illegal. Kalshi and Polymarket US both hold federal designations from the CFTC, and nothing in these rulings touches that. What is in dispute is narrower: whether that federal designation also blocks a state from applying its own laws to sports contracts sold inside its borders.

It does not mean the Supreme Court will hear the case. A circuit split makes review more likely, not certain. Kalshi will file a response, and the Court decides on its own schedule.

It does not settle non-sports contracts. Every one of these fights is about sports. Contracts on inflation, elections, weather and company results are not what these courts were asked about.

And it does not answer the federal question, which is moving separately. The CFTC's proposed rule, Prediction Markets; Public Interest Determinations, docket CFTC-2026-1189, was published on June 12, 2026. Its comment period closed on July 27 with 1,454 comments received. It would define what "gaming" means for these purposes and set the factors the Commission weighs before a contract can be blocked. Until that rule is final, the agency's own standard is unsettled while the courts argue about how far it reaches.

Where this leaves you

If you trade on Kalshi or Polymarket US, your practical question is not preemption doctrine. It is whether your state is inside a circuit that has now blessed enforcement, and whether the platform has geofenced you out. That changes by state and it is changing fast. Our Kalshi and Polymarket comparison explains how the two platforms differ on regulation and access, and our earlier piece on the New York City Council's marketing inquiry covers the separate consumer protection front.

We have one market on the board that touches this directly: "Will the U.S. Senate Committee on Indian Affairs propose new regulations for prediction markets by December 31, 2026?" It opened at 45 cents Yes and 55 cents No. That is the opening line and nothing more. The market has no volume and no traders, so it tells you what our seeding thought, not what anybody believes. The tribal angle is not incidental, given that the Ninth Circuit named tribal governments alongside federal and state ones.

Ravioli is a free-to-play prediction market where you call real events with Sense, our free in-game currency, and real prizes are on the line. We label opening lines as opening lines and we publish our misses at the same size as our hits.

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