Indian Gaming and Prediction Markets: Circuit Split Raises the Stakes

The distinction issues. If the Commodity Exchange Act (CEA), as amended by the 2010 Dodd-Frank Act, offers the Commodity Futures Trading Commission (CFTC) unique authority over occasion contracts, then prediction markets may keep away from regulation below state, Tribal and different federal regulation.

Three developments have now introduced that disagreement into sharp focus: The Third Circuit accepted the place provided by prediction market platform Kalshi, the Ninth Circuit rejected that very same place, and events on either side have requested 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 stopping New Jersey from imposing its sports-gambling legal guidelines in opposition to Kalshi. KalshiEX LLC v. Flaherty, 172 F.4th 220 (3d Cir. 2026). The majority held that Kalshi was prone to present that its sports-event contracts are “swaps” below Dodd-Frank as a result of cost relies on an occasion that may be “associated with a potential financial, economic, or commercial consequence.” The Court reasoned that sports activities outcomes can have financial penalties for sponsors, advertisers, tv networks, franchises and others, and that “[t]he analysis need not go further.”

From that premise, the bulk concluded that the CFTC has unique jurisdiction over Kalshi’s sports-event contracts as a result of they commerce on a CFTC-registered designated contract market. It held that each area and battle preemption possible barred New Jersey from making use of its gaming legal guidelines to Kalshi’s trade. According to the bulk, Congress created a “comprehensive regulatory structure to oversee the volatile and esoteric futures trading complex,” and New Jersey’s tried regulation offered “exactly the patchwork that Congress replaced wholecloth by creating the CFTC.” The majority additionally relied partially on the CFTC’s present place (that it has unique federal jurisdiction over prediction markets) and determination to not prohibit Kalshi’s sports-event contracts.

Judge Jane Roth dissented. She opened by observing that Kalshi’s choices—together with occasion contracts on recreation outcomes, level spreads, complete scores and individual-player efficiency—had been “virtually indistinguishable” from wagers provided by regulated sportsbooks. In her view, the bulk handled Kalshi’s registration as a chosen contract market and its branding of wagers as occasion contracts as “acts of alchemy that transmute its products from sports gambling to futures trading.” She cited Kalshi’s personal Instagram advertising and 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 precept and will embody “virtually every kind of wager that could exist,” together with on line casino video games, charity raffles and “a friendly neighborhood ping pong match.” Because the CEA prohibits swaps outdoors designated contract markets, taking Kalshi’s broad interpretation “to its logical extreme” would imply that “any individual who engages in gambling outside of a DCM would commit a felony.”

Judge Roth rejected federal preemption as a result of Congress expressed no “clear and manifest purpose” to displace the states’ historic authority over playing. 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 other end in Kalshi’s problem 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 determine that its sports-event contracts are swaps below the CEA.

“Kalshi has a gambling problem,” the Court defined. While Kalshi markets its merchandise as “the first app for legal sports betting in all 50 states,” it argued in courtroom that sports-event contracts aren’t actually bets, as a result of the platform doesn’t act because the “house,” and doesn’t straight set odds for the outcomes of its occasion contracts. The Ninth Circuit was unimpressed with this argument, discovering that it “strains credulity,” and describing Kalshi’s evaluation as each “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 occasions inside the CFTC’s jurisdiction. If sports activities betting on Kalshi isn’t any completely different below the CEA from sports activities betting at a conventional 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 discovered no indication that Congress meant Dodd-Frank to displace the present conventional federal, state and Tribal framework governing playing: “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 in any other case 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 additionally rejected Kalshi’s argument that for Kalshi to adjust to Nevada regulation, it could be pressured to violate the CEA’s requirement that designated contract markets present “impartial access.” The Court noticed that different regulated designated contract markets have used geofencing to adjust to state and Tribal rules, offering completely different merchandise to clients in numerous jurisdictions, and the CTFC has not sought to threaten the regulated standing of these events. Kalshi “could do the same,” the Court wrote, “it just refuses to do so and instead seeks a competitive advantage over its competitors.” (Although solely a minor piece of the Ninth Circuit’s general evaluation, the query of whether or not a prediction market platform might, below federal regulation, geofence its product to exclude sure areas is prone to be of nice curiosity to Tribes wishing to ban on-reservation customers from accessing these platforms as an alternative of putting wagers with Tribal sportsbooks.)

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

So Far, Three Petitions Ask SCOTUS to Resolve the Split
New Jersey filed the primary petition for certiorari on September 2, 2026, searching for SCOTUS overview of the Third Circuit’s determination. Flaherty v. KalshiEX LLC, No. 26-299. The petition asks whether or not Dodd-Frank preempts states from regulating sports activities bets inside their jurisdictions when these bets are provided on CFTC-registered markets. New Jersey emphasizes that the Third and Ninth Circuits are straight divided on that query and that, in an “explosion of litigation,” courts throughout the nation have already issued greater than 20 choices, “with the overwhelming majority [18 to 4] rejecting the Third Circuit’s strategy.” New Jersey argues that solely SCOTUS can present “[s]tates, prediction markets, the CFTC, Tribes, and casinos with a definitive answer.”

Just over per week later, on September 10, Robinhood requested SCOTUS to overview the Ninth Circuit’s determination, adopted the subsequent day by a petition from Crypto.com’s affiliated (and creatively named) trade, 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 had been consolidated with Kalshi’s case for argument and determination, and each petitions search overview of the Ninth Circuit’s conclusion that sports-event contracts aren’t swaps topic to unique CFTC jurisdiction. Kalshi, in the meantime, has requested the Ninth Circuit itself to rehear the case both earlier than the unique panel or en banc. Petition for Rehearing and Rehearing En Banc, KalshiEX LLC v. Assad, No. 25-7516.

The competing petitions give SCOTUS autos from either side of the break up and—although SCOTUS overview is rarely assured—might reinforce the necessity for a uniform nationwide reply.

The Stakes for Tribal Gaming and What Comes Next
Although the pending SCOTUS petitions come up from state enforcement actions, their penalties may prolong to Tribal gaming.

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

An further, new Ninth Circuit determination by a distinct panel of judges focuses squarely on that difficulty. On September 16, 2026, the Court held that Blue Lake Rancheria and Chicken Ranch Rancheria had been prone to succeed on their claims that Kalshi’s sports-event contracts represent unauthorized Class III gaming below IGRA when provided to customers on Indian lands. Blue Lake Rancheria v. Kalshi, Inc., No. 25-7504. Crucially for the Tribes, the Court additionally held that the CEA doesn’t displace or supersede IGRA, and that it could attain the identical conclusion even when Kalshi’s contracts had been categorised as swaps, as a result of even in that case, the regulatory regime created by IGRA would nonetheless govern on Tribal lands. And on September 11, the Western District of Wisconsin licensed Kalshi’s interlocutory attraction to the Seventh Circuit addressing comparable questions. Ho-Chunk Nation v. Kalshi Inc., No. 25-cv-698.

If the Supreme Court grants overview of the pending cert petitions by New Jersey, Robinhood or Crypto.com, the Court will possible settle whether or not sports-event contracts qualify as swaps and whether or not the CEA preempts state regulation of these merchandise. However, the Court might not reply each query regarding IGRA or the cures out there to Tribal governments in opposition to prediction-market operators. More litigation is a protected guess.