Indian Gaming and Prediction Markets: Circuit Split Raises the Stakes

The difference matters. If the Commodity Exchange Act (CEA), as amended by the 2010 Dodd-Frank Act, gives the Commodity Futures Trading Commission (CFTC) exclusive authority over event contracts, then prediction markets could avoid regulation under state, Tribal and other federal law.

Three developments have now brought that disagreement into sharp focus: The Third Circuit accepted the position offered by prediction market platform Kalshi, the Ninth Circuit rejected that same position, and parties on both sides have asked the U.S. Supreme Court to intervene.

The Third Circuit Accepts Kalshi’s Theory
On April 6, 2026, a divided Third Circuit affirmed a preliminary injunction preventing New Jersey from enforcing its sports-gambling laws against Kalshi. KalshiEX LLC v. Flaherty, 172 F.4th 220 (3d Cir. 2026). The majority held that Kalshi was likely to show that its sports-event contracts are “swaps” under Dodd-Frank because payment depends on an event that can be “associated with a potential financial, economic, or commercial consequence.” The Court reasoned that sports outcomes can have economic consequences for sponsors, advertisers, television networks, franchises and others, and that “[t]he analysis need not go further.”

From that premise, the majority concluded that the CFTC has exclusive jurisdiction over Kalshi’s sports-event contracts because they trade on a CFTC-registered designated contract market. It held that both field and conflict preemption likely barred New Jersey from applying its gaming laws to Kalshi’s exchange. According to the majority, Congress created a “comprehensive regulatory structure to oversee the volatile and esoteric futures trading complex,” and New Jersey’s attempted regulation presented “exactly the patchwork that Congress replaced wholecloth by creating the CFTC.” The majority also relied in part on the CFTC’s current position (that it has exclusive federal jurisdiction over prediction markets) and decision not to prohibit Kalshi’s sports-event contracts.

Judge Jane Roth dissented. She opened by observing that Kalshi’s offerings—including event contracts on game outcomes, point spreads, total scores and individual-player performance—were “virtually indistinguishable” from wagers offered by regulated sportsbooks. In her view, the majority treated Kalshi’s registration as a designated contract market and its branding of wagers as event contracts as “acts of alchemy that transmute its products from sports gambling to futures trading.” She cited Kalshi’s own Instagram marketing as “The First Nationwide Legal Sports Betting Platform,” reasoning that “if it looks like gambling, talks like gambling, and calls itself gambling, it’s gambling.”

Judge Roth warned that Kalshi’s interpretation of “swaps” lacked a limiting principle and could encompass “virtually every kind of wager that could exist,” including casino games, charity raffles and “a friendly neighborhood ping pong match.” Because the CEA prohibits swaps outside designated contract markets, taking Kalshi’s broad interpretation “to its logical extreme” would mean that “any individual who engages in gambling outside of a DCM would commit a felony.”

Judge Roth rejected federal preemption because Congress expressed no “clear and manifest purpose” to displace the states’ historic authority over gambling. As she put it, “[i]f Congress wanted the CFTC to serve as a kind of national sports gaming commission, it would not have stated its intention ‘in so cryptic a fashion.’”

The Ninth Circuit Rejects Kalshi’s Theory
On August 28, 2026, the Ninth Circuit reached the opposite result in Kalshi’s challenge to a cease-and-desist order issued by the Nevada Gaming Control Board. KalshiEX LLC v. Assad, 2026 WL 2543846 (9th Cir. Aug. 28, 2026). The Court held that Kalshi was unlikely to establish that its sports-event contracts are swaps under the CEA.

“Kalshi has a gambling problem,” the Court explained. While Kalshi markets its products as “the first app for legal sports betting in all 50 states,” it argued in court that sports-event contracts are not really bets, because the platform does not act as the “house,” and does not directly set odds for the outcomes of its event contracts. The Ninth Circuit was unimpressed with this argument, finding that it “strains credulity,” and describing Kalshi’s analysis as both “unpersuasive” and “disingenuous.” “That Kalshi's sports event contracts are, in reality, sports bets is not just an ‘I know it when I see it’ issue,” wrote the Court, “[r]ather, everyone, including Kalshi, knows it when they see it.” “Just as ‘[t]hat which we call a rose by any other name would smell as sweet,’… placing sports bets, even when called by another name, is still gambling.”

Furthermore, the Ninth Circuit agreed with Judge Roth that Kalshi’s interpretation would place all wagers on sporting events within the CFTC’s jurisdiction. If sports betting on Kalshi is no different under the CEA from sports betting at a traditional sportsbook, the Court reasoned, “then every person placing a sports bet at Caesar’s Sportsbook (or anywhere else for that matter) is violating the CEA.”

More broadly, the Ninth Circuit found no indication that Congress intended Dodd-Frank to displace the existing traditional federal, state and Tribal framework governing gambling: “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 to add the definition of swap.” Reading the Act otherwise would assume that Congress “hid an elephant in a mousehole.” The Court concluded that “[t]he Dodd-Frank Wall Street Reform Act cannot be read as a direct (or indirect) regulation of sports gambling, and the CFTC is not a national gambling regulator.”

The Ninth Circuit also rejected Kalshi’s argument that for Kalshi to comply with Nevada law, it would be forced to violate the CEA’s requirement that designated contract markets provide “impartial access.” The Court observed that other regulated designated contract markets have used geofencing to comply with state and Tribal regulations, providing different products to customers in different jurisdictions, and the CTFC has not sought to threaten the regulated status of those parties. Kalshi “could do the same,” the Court wrote, “it just refuses to do so and instead seeks a competitive advantage over its competitors.” (Although only a minor piece of the Ninth Circuit’s overall analysis, the question of whether a prediction market platform may, under federal law, geofence its product to exclude certain locations is likely to be of great interest to Tribes wishing to prohibit on-reservation users from accessing these platforms instead of placing wagers with Tribal sportsbooks.)

Judge Kenneth Lee’s concurrence emphasized the implications for Tribal authority in particular: “Given that sports gambling is a multibillion-dollar industry historically regulated by states and Indian tribes, it would seem odd” to interpret abstract language in the CEA as “upending this longstanding regulatory regime.”

So Far, Three Petitions Ask SCOTUS to Resolve the Split
New Jersey filed the first petition for certiorari on September 2, 2026, seeking SCOTUS review of the Third Circuit’s decision. Flaherty v. KalshiEX LLC, No. 26-299. The petition asks whether Dodd-Frank preempts states from regulating sports bets within their jurisdictions when those bets are offered on CFTC-registered markets. New Jersey emphasizes that the Third and Ninth Circuits are directly divided on that question and that, in an “explosion of litigation,” courts across the country have already issued more than 20 decisions, "with the vast majority [18 to 4] rejecting the Third Circuit’s approach.” New Jersey argues that only SCOTUS can provide “[s]tates, prediction markets, the CFTC, Tribes, and casinos with a definitive answer.”

Just over a week later, on September 10, Robinhood asked SCOTUS to review the Ninth Circuit’s decision, followed the next day by a petition from Crypto.com’s affiliated (and creatively named) exchange, North American Derivatives Exchange. Robinhood Derivatives, LLC v. Dreitzer, No. 26-338; North American Derivatives Exchange, Inc. v. Nevada, No. 26-344. Their Nevada appeals were consolidated with Kalshi’s case for argument and decision, and both petitions seek review of the Ninth Circuit’s conclusion that sports-event contracts are not swaps subject to exclusive CFTC jurisdiction. Kalshi, meanwhile, has asked the Ninth Circuit itself to rehear the case either before the original panel or en banc. Petition for Rehearing and Rehearing En Banc, KalshiEX LLC v. Assad, No. 25-7516.

The competing petitions give SCOTUS vehicles from both sides of the split and—though SCOTUS review is never guaranteed—may reinforce the need for a uniform national answer.

The Stakes for Tribal Gaming and What Comes Next
Although the pending SCOTUS petitions arise from state enforcement actions, their consequences could extend to Tribal gaming.

In particular, New Jersey argues that Kalshi’s position—and the Third Circuit’s acceptance of it—creates a “workaround” to the Indian Gaming Regulatory Act (IGRA) under which Tribes operate and regulate gaming activity on Indian lands New Jersey warns that Kalshi’s interpretation would “override[] the entire purpose and function of IGRA” and allow prediction markets “to enter Indian lands and siphon gaming revenues away from tribes.”

An additional, new Ninth Circuit decision by a different panel of judges focuses squarely on that issue. On September 16, 2026, the Court held that Blue Lake Rancheria and Chicken Ranch Rancheria were likely to succeed on their claims that Kalshi’s sports-event contracts constitute unauthorized Class III gaming under IGRA when offered to users on Indian lands. Blue Lake Rancheria v. Kalshi, Inc., No. 25-7504. Crucially for the Tribes, the Court also held that the CEA does not displace or supersede IGRA, and that it would reach the same conclusion even if Kalshi’s contracts were classified as swaps, because even in that case, the regulatory regime created by IGRA would still govern on Tribal lands. And on September 11, the Western District of Wisconsin certified Kalshi’s interlocutory appeal to the Seventh Circuit addressing similar questions. Ho-Chunk Nation v. Kalshi Inc., No. 25-cv-698.

If the Supreme Court grants review of the pending cert petitions by New Jersey, Robinhood or Crypto.com, the Court will likely settle whether sports-event contracts qualify as swaps and whether the CEA preempts state regulation of those products. However, the Court may not answer every question concerning IGRA or the remedies available to Tribal governments against prediction-market operators. More litigation is a safe bet.