9th Circuit backs states in Kalshi gambling case, may revive Arizona prosecution

The U.S. Court of Appeals for the Ninth Circuit issued a ruling on Monday that aligns with state regulators in the ongoing dispute over Kalshi, a Chicago‑based exchange that offers event‑based contracts. The panel affirmed lower‑court decisions that classify Kalshi’s products as gambling under state law, rejecting the company’s argument that its offerings are merely financial derivatives overseen by the Commodity Futures Trading Commission. By siding with the states, the court effectively overturns a previous district‑court dismissal and opens the door for Arizona to revive its criminal prosecution of Kalshi and its executives, which had been stalled pending the appellate outcome.

Legal experts note that the decision could have broader ramifications for the nascent market of regulated betting platforms, many of which operate on the premise that federal oversight precludes state‑level gambling restrictions. The Ninth Circuit’s opinion underscores the authority of individual states to enforce their own gambling statutes, even when a product is federally regulated, and signals that other jurisdictions may pursue similar actions. Kalshi has indicated it will consider further appellate review, but the ruling marks a significant shift in the regulatory landscape for event‑contract trading.