Ninth Circuit Ruling Deals Blow to CFTC Event Contract Proposal

A federal appeals court has dealt a blow to the Commodity Futures Trading Commission's (CFTC) proposed rules for event contracts, ruling that Kalshi's sports-event contracts do not qualify as swaps under the Commodity Exchange Act.

The Ninth Circuit Court of Appeals' unanimous decision on August 28 preserves Nevada's authority over its gaming laws and allows the state to enforce its requirements against Kalshi. The court rejected Kalshi's argument that federal jurisdiction displaced Nevada's gaming laws, stating that 'the CFTC is not a national gambling regulator.'

Gaming attorney Daniel Wallach predicted that the CFTC's rulemaking was 'DOA' due to the major-questions analysis in the opinion. However, Ripple's CTO emeritus David Schwartz disagreed, arguing that Congress could create a federal framework for exchange-traded contracts without displacing conventional state-regulated sportsbooks.

The decision does not invalidate the CFTC's proposed event-contract rules or decide whether a future final rule would survive an Administrative Procedure Act lawsuit. The proposal remains pending and faces new risks, with potential APA challenges over statutory authority, procedure, or agency reasoning.