A federal appeals court has ruled that sports betting is not shielded by the federal Commodity Exchange Act, a decision that could allow Arizona to resume its prosecution of online prediction market company Kalshi.
The 9th U.S. Circuit Court of Appeals made the ruling in a separate Nevada case, but it directly undermines a federal judge’s earlier decision that had blocked Arizona Attorney General Kris Mayes from prosecuting Kalshi for violating the state’s gambling laws and a law prohibiting election betting.
In May, federal Judge Michael Liburdi had sided with Kalshi’s interpretation of the Commodity Exchange Act, concluding that sporting events qualify as “events” and “occurrences” under that law and thus fall under the jurisdiction of the Commodity Futures Trading Commission, the federal agency that oversees prediction markets. The CFTC has largely declined to restrict companies like Kalshi from accepting bets on sports and elections.
However, the three-judge 9th Circuit panel—all appointed by President Donald Trump—rejected this broad reading. The court held that the words “event” and “occurrence” in the law must carry independent meaning. As Judge Ryan Nelson wrote in the unanimous decision, “whether the Super Bowl happens is an ‘occurrence,’ but who wins it is not.” The ruling concluded that sports events do not qualify as “swaps” under federal law and thus are not protected by it.
“Congress did not take a wrecking ball to all sports gambling regulations built up over decades by federal, state, and tribal governments,” Nelson wrote.
Arizona Attorney General Mayes said in a statement that the ruling was “a significant win for states’ authority to regulate gambling operations.” She added that “calling a sports bet a ‘swap’ doesn’t make it one” and that the court “clearly” explained that federal commodities law “was never intended to strip states of their traditional police power over gambling.”
Mayes’ office has signaled it will seek to have the injunction lifted based on the 9th Circuit’s decision, which could allow Arizona’s stalled 20-count criminal case against Kalshi to resume.
The 9th Circuit’s decision conflicts with an earlier 2026 ruling by the 3rd U.S. Circuit Court of Appeals, which sided with Kalshi and found that states lack authority to regulate prediction markets’ bets on sporting events. The 9th Circuit judges explicitly critiqued the 3rd Circuit’s reasoning, invoking the major questions doctrine—the principle that federal agencies cannot transform old laws into new laws through expansive interpretation—and setting up a potential U.S. Supreme Court battle.
Key facts
- The 9th Circuit ruled that sports betting is not protected by the federal Commodity Exchange Act
- The decision came in a Nevada case but directly impacts Arizona’s ability to prosecute Kalshi
- Federal Judge Liburdi had previously blocked Arizona’s prosecution by siding with Kalshi’s interpretation of the law
- Arizona can now seek to have the injunction lifted and resume its 20-count criminal case against Kalshi
- The ruling conflicts with a 3rd Circuit Court of Appeals decision earlier this year that sided with Kalshi