The Ninth Circuit has called Kalshi’s contracts what its advertising already did: sports betting. 

Kalshi’s marketing department wrote the opening line of its own legal defeat.

“KalshiEX, LLC advertises itself as ‘the first app for legal sports betting in all 50 states’,” Judge Ryan Nelson wrote in the first sentence of the Ninth Circuit’s 50-page opinion.

It appears to be a rough way to learn that ad copy can become evidence.

Kalshi has spent much of its legal battle arguing that its sports contracts are not sports bets but financial derivatives traded on a federally regulated exchange. The court noticed the slight branding inconsistency.

A unanimous three-judge panel ruled on Friday that Kalshi’s sports event contracts are, in substance, sports bets. Because those bets are not “swaps” within the meaning of the Commodity Exchange Act, they do not fall within the Commodity Futures Trading Commission’s exclusive jurisdiction. Nevada can therefore apply its gaming laws.

Calling a wager an event contract, the court effectively concluded, does not make it any less of a wager. Or, as Nelson put it with an unexpected assist from Shakespeare, “placing sports bets, even when called by another name, is still gambling”.

The ruling threatens the premise that allowed Kalshi to offer sports markets nationwide without collecting state gambling licences like particularly difficult Pokémon.

It also creates a direct split with the Third Circuit, which sided with Kalshi against New Jersey in April. In that court, a sports result could qualify as an event associated with an economic consequence and therefore support a federally regulated swap. In the Ninth Circuit, a parlay remains a parlay even if it arrives wearing a derivatives badge.

The Supreme Court may eventually have to decide which version of reality applies.

Nevada can enforce its gambling laws while litigation continues

Technically, the Ninth Circuit has not issued a final judgment on whether Kalshi’s entire business is lawful.

The case concerns a preliminary injunction.