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Analysis · Law and licensing

Is Kalshi gambling? What the CFTC, the federal courts and the state regulators say about prediction markets

Published 2026-10-09By the CryptoGuardz Register Desk8 min read22 sources

Photo: Margaret Giatras / Unsplash

In short, from the documents

Is Kalshi gambling?

Federally, Kalshi is a CFTC-designated contract market, not a sportsbook. Several states say its sports contracts are unlicensed gambling. As of 9 October 2026 the Third Circuit sided with Kalshi in New Jersey, the Ninth and Sixth Circuits sided with Nevada, Ohio and Tennessee, and New Jersey has asked the Supreme Court to decide.

Piece published 2026-10-09Reviewed by CryptoGuardz Register Desk, editorial desk

Whether Kalshi is gambling depends on which regulator you ask, and on 9 October 2026 the federal courts had not settled it. The CFTC designated KalshiEX LLC a designated contract market in November 2020, which makes it a federally regulated derivatives exchange. Nevada, New York, Ohio, Massachusetts and other states say its sports contracts are unlicensed sports betting. Three federal appeals courts have ruled on the question in 2026 and they do not agree.

This page sets out each regulator's and each court's position as theirs, with the document and its date. It is not legal advice, and it does not rank or recommend any platform.

What is Kalshi, legally?

A federally designated exchange. The CFTC's release of 4 November 2020 is headed "CFTC Designates KalshiEX LLC as a Contract Market" and says the Commission "has issued an Order of Designation to KalshiEX LLC, granting it status as a designated contract market (DCM)." A DCM lists futures and other derivatives under the Commodity Exchange Act. What Kalshi sells are event contracts: a contract that pays out if a stated event happens, such as a team winning or a party taking a chamber of Congress.

The Act lets the CFTC block event contracts that involve activity listed in section 5c(c)(5)(C). The CFTC's own release of 10 June 2026 lists those as "activity that involves terrorism, assassination, war, gaming, or conduct that is unlawful under federal or state law". The word "gaming" in that list is where most of the litigation starts.

What did the court decide in Kalshi v. CFTC?

That Kalshi's election contracts are not gaming. In 2023 the CFTC refused to let Kalshi list contracts on which party would control Congress. Kalshi sued in the District of Columbia. On 12 September 2024 Judge Cobb's memorandum opinion held:

Accordingly, the Court concludes that Kalshi's congressional control contracts do not involve unlawful activity or gaming.

KalshiEX LLC v. CFTC, D.D.C. No. 23-cv-3257, memorandum opinion, 12 September 2024, p. 26

CFTC drops appeal over election prediction marketsVideo by CNBC Television on YouTube. Watch on YouTubeA CNBC news report on the CFTC dropping its appeal in the Kalshi election-contract case, the ruling this section describes.

The opinion also says: "This case is not about whether the Court likes Kalshi's product or thinks trading it is a good idea." The CFTC appealed to the D.C. Circuit as No. 24-5205. The docket summary read on 9 October 2026 stops at November 2024, so how that appeal ended was not verified from a court document.

That ruling was about election contracts and the CFTC. It did not decide whether a state can treat a sports contract as a sports bet.

Is Kalshi gambling under state law?

Several state regulators say yes for sports. Their own documents:

Nevada. On 4 March 2025 the Gaming Control Board told Kalshi to "cease all unlawful activity within Nevada by 5:00 p.m. on March 14, 2025", saying event contracts on sports and elections are "unlawful in Nevada, unless and until approved as licensed gaming by the Nevada Gaming Commission."
New York. On 24 October 2025 the Gaming Commission's executive director wrote that "the Commission demands that Kalshi cease and desist immediately from illegally operating", citing Racing Law section 1367-a(4)(b): "No entity shall directly or indirectly operate an unlicensed sports wagering platform in the state of New York". On 31 July 2026 the Attorney General announced that New York "has sued KalshiEX, LLC (Kalshi) for running an illegal gambling operation".
Massachusetts. The Attorney General sued in Suffolk Superior Court on 12 September 2025. On 20 January 2026 her office said the court's order would allow a preliminary injunction "prohibiting Kalshi from accepting online sports wagers and related events contracts from Massachusetts customers" until it is licensed by the Massachusetts Gaming Commission. The order itself was not read: not verified.

A small brass balance scale on painted wooden boards — Illustration only: a balance scale. Whether an event contract is a swap or a wager is the question the courts are weighing. Photo: Elena Mozhvilo / Unsplash

Kalshi's answer, in every one of these cases, is preemption: that federal law gives the CFTC exclusive jurisdiction over contracts traded on a DCM, so state gambling law cannot reach them.

What have the appeals courts ruled?

They have split. Each of the three decisions so far is on a preliminary injunction, not a final judgment.

Court	Case	Date	Result
Third Circuit	KalshiEX v. Flaherty (New Jersey)	6 Apr 2026	Injunction for Kalshi affirmed, 2-1
Ninth Circuit	KalshiEX v. Assad (Nevada)	28 Aug 2026	Dissolution of Kalshi's injunction affirmed in part
Sixth Circuit	KalshiEX v. Schuler (Ohio, Tennessee)	25 Sep 2026	Ohio denial affirmed, Tennessee injunction vacated
Fourth Circuit	KalshiEX v. Martin (Maryland)	Appeal filed 6 Aug 2025	No opinion found
Supreme Court	Flaherty v. KalshiEX, No. 26-299	Petition filed 2 Sep 2026	Response due 9 Nov 2026

The Third Circuit majority held that "Kalshi's sports-related event contracts are swaps traded on a CFTC-licensed DCM, so the CFTC has exclusive jurisdiction," and that "The Act preempts state laws that directly interfere with swaps traded on DCMs." Judge Roth dissented:

I see Kalshi's actions as a performative sleight meant to obscure the reality that Kalshi's products are sports gambling.

KalshiEX LLC v. Flaherty, 3d Cir. No. 25-1922, dissent, 6 April 2026

The Ninth Circuit went the other way for Nevada: "Kalshi has not shown a likelihood that the CEA preempts state gaming regulations as applied to its sports event contracts." It sent the election contracts back: "We remand for the district court to consider Kalshi's election contracts."

The Sixth Circuit went further. It held that "Kalshi's sports-event contracts do not constitute swaps under § 1a(47)(A)(ii)" and, in the alternative, "that the CEA neither expressly nor impliedly preempts the States' gambling laws." The opinion is marked for publication.

New Jersey filed for certiorari on 2 September 2026. The Supreme Court docket shows amicus briefs from 39 states and the District of Columbia, the National Football League and the American Gaming Association, among others, and Kalshi's response due 9 November 2026. No conference date was shown on 9 October 2026.

What has the CFTC done in 2026?

It has backed the exchanges. On 4 February 2026 it withdrew its 2024 event contracts rule proposal and Staff Letter 25-36. On 17 February it said in a Ninth Circuit filing that it was reaffirming "Exclusive Jurisdiction over Prediction Markets". Staff Letter 26-08, of 12 March 2026, says sports event contracts "have often been shown to be consistent with DCM Core Principle 3", and also that it "may not be relied upon to create any rights". On 2 April 2026 the CFTC sued Arizona, Connecticut and Illinois, citing "the CFTC's clear and longstanding exclusive jurisdiction to regulate event contracts under the Commodity Exchange Act."

On 10 June 2026 it proposed amendments to Regulation 40.11 that would set "a structured framework" for deciding whether a contract involves gaming and whether it is "contrary to the public interest." Whether that becomes a final rule was not verified on 9 October 2026.

What is Polymarket's US status?

Two products, two answers. On 3 January 2022 the CFTC ordered Blockratize, Inc. d/b/a Polymarket to pay a "$1.4 million civil monetary penalty" for offering event-based binary options without "designation as a designated contract market (DCM) or registration as a swap execution facility (SEF)."

Polymarket's US entry runs through a separate exchange. The CFTC's amended designation order names "QCX LLC d/b/a Polymarket US", originally designated "on July 9, 2025". Staff Letter 25-28 of 2 September 2025 gave QCX LLC and QC Clearing LLC no-action relief from certain reporting rules: "The Divisions will not recommend that the Commission initiate an enforcement action." The amended order's own date and the terms of Polymarket's international site were not read: not verified. A DCM designation does not answer the state law question either: the same preemption argument applies.

What this does not show

No final judgment on the merits in any of these cases. Whether the Supreme Court will take the New Jersey case. The Maryland district court's reasoning, and the Massachusetts order's text, neither of which was read. State law on prediction markets in the other states is not covered here; the US state guide records what each state's regulator has said about online casinos and sweepstakes, for example New York and Nevada.

Quick answers

Is Kalshi legal in the US?

It is a CFTC-designated contract market since November 2020. Nevada, New York, Ohio and Massachusetts say its sports contracts need a state betting licence. Courts have split, 1 appeals court for Kalshi and 2 against.

Is Kalshi gambling or trading?

The D.D.C. held in 2024 its election contracts are not "gaming" under the federal Act. The Sixth Circuit held on 25 September 2026 its sports contracts are not swaps and state gambling law applies.

Can states ban Kalshi?

The Ninth and Sixth Circuits said Kalshi had not shown federal law stops them. The Third Circuit said it likely does in New Jersey. Supreme Court case 26-299 is pending.

Is Polymarket legal in the US?

The CFTC fined Polymarket's operator $1.4 million in 2022. In 2025 QCX LLC, now d/b/a Polymarket US, was designated a DCM. State gambling law questions are the same as for Kalshi.

Where can I get help with gambling in the US?

The National Problem Gambling Helpline is 1-800-MY-RESET (1-800-697-3738), with call, text and chat. More options are on the responsible gambling page.

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Sources

About this piece

Compiled by the CryptoGuardz register team from the sources listed above. Research and drafting are AI-assisted and reviewed by a named editor before publication. Nothing here is a recommendation to gamble. If a figure or a reading is wrong, tell us and the correction is logged in public.