---
type: source
title: "Kalshi Makes Its Case for Federal Court as Ninth Circuit Hearing Tees Up Potential Supreme Court Review"
author: "National Law Review"
url: https://natlawreview.com/article/kalshi-makes-its-case-federal-court-ninth-circuit-hearing-tees-potential-supreme
date: 2026-04-21
domain: internet-finance
secondary_domains: []
format: article
status: processed
processed_by: rio
processed_date: 2026-04-25
priority: medium
tags: [ninth-circuit, kalshi, scotus, prediction-markets, circuit-split, preemption, cftc]
extraction_model: "anthropic/claude-sonnet-4.5"
---

## Content

April 21, 2026: Analysis of the 9th Circuit oral arguments (April 16) and the emerging circuit split in prediction market preemption cases.

Key facts:
- 9th Circuit ruling expected within 60-120 days of April 16 (mid-June to mid-August 2026)
- Panel of all Trump-appointed judges appeared to lean Nevada's way
- Central legal questions: (1) whether sports event contracts are "swaps" under 7 U.S.C. § 1a(47)(A)(ii); (2) whether CEA's exclusive jurisdiction provision preempts state gaming law; (3) whether CEA's comprehensive regulatory scheme displaces state law (field preemption)
- Third Circuit (April 7) held FOR Kalshi on all three questions
- If 9th Circuit rules against Kalshi → explicit circuit split → near-certain SCOTUS cert

The article describes the platforms' argument: CEA grants CFTC exclusive jurisdiction over commodity futures/swaps, which preempts state gambling regulation as applied to DCM-traded contracts. They argue fragmented state enforcement undermines CEA's national uniformity objective.

Nevada's counter: Rule 40.11 (CFTC's own regulation) says contracts "unlawful under state law" cannot be listed. Judge Nelson appeared to accept this during oral arguments: "The language says it can't go up (on the platform). I don't know how you can read it differently."

The Rule 40.11 paradox: CFTC's own rule potentially undercuts CFTC's preemption claim. If Nevada gambling law makes these contracts unlawful, CFTC's own regulation says they can't be listed. This would mean CFTC cannot preempt state law for contracts its own rules prohibit in states where they're unlawful.

## Agent Notes

**Why this matters:** The Rule 40.11 paradox is the intellectually sharpest edge of this case. If the 9th Circuit relies on it, the ruling would be different in KIND from the 3rd Circuit ruling — different legal theories, not just different outcomes. That creates the deepest possible circuit split (conflicting legal frameworks, not just conflicting results). SCOTUS would face a "which theory is right?" question, not just a "who wins?" question.

**What surprised me:** Judge Ryan Nelson — a Trump appointee who might have been expected to favor federal regulatory authority over states — appeared to ACCEPT Nevada's Rule 40.11 argument. This is an unusual alignment for a Trump-appointed Republican judge to rule for state regulatory authority over federal preemption in a financial services context.

**What I expected but didn't find:** No discussion of on-chain prediction markets, decentralized protocols, or futarchy governance. The case is entirely about DCM-registered centralized platforms.

**KB connections:**
- Session 26 CLAIM CANDIDATE: "Third Circuit's 'DCM trading' field preemption frames protection narrowly — decentralized on-chain futarchy protocols outside CFTC registration receive no preemption shield from state gambling law" — this article reinforces the scope limitation
- [[CFTC-licensed DCM preemption protects centralized prediction markets but not decentralized governance markets]]

**Extraction hints:**
- Primary claim: "Rule 40.11 paradox creates a circuit split that is fundamentally about legal theory, not just outcome — if the 9th Circuit relies on CFTC's own rule to defeat preemption, it creates the deepest possible conflict with the 3rd Circuit's preemption affirmation"
- Note the timing: ruling in June-August 2026 means SCOTUS cert would be sought fall 2026, argued spring 2027 at earliest.

## Curator Notes (structured handoff for extractor)
PRIMARY CONNECTION: [[CFTC-licensed DCM preemption protects centralized prediction markets but not decentralized governance markets]]
WHY ARCHIVED: The Rule 40.11 paradox angle is novel — if CFTC's own regulation defeats its preemption claim, that's a claim about regulatory self-contradiction that belongs in the KB.
EXTRACTION HINT: Focus on the Rule 40.11 paradox as the specific mechanism that could produce a theory-level circuit split. This is more precise than "9th Circuit vs 3rd Circuit on preemption."
