---
type: source
title: "Prediction Markets Get Cold Reception Before Ninth Circuit"
author: "Bloomberg Law"
url: https://news.bloomberglaw.com/litigation/prediction-markets-get-cold-reception-at-9th-cir-in-nevada-case
date: 2026-04-17
domain: internet-finance
secondary_domains: []
format: article
status: unprocessed
priority: high
tags: [9th-circuit, prediction-markets, Kalshi, Nevada, federal-preemption, oral-arguments, rule-40-11, CFTC]
---

## Content

Bloomberg Law's coverage of the April 16, 2026 Ninth Circuit oral arguments. Key findings:

**Panel behavior:** All three judges (Nelson, Bade, Lee) — all Trump first-term appointees — showed marked skepticism toward prediction markets and the CFTC's position. This is significant: the 9th Circuit was expected to be the "friendly" circuit for a Trump-aligned industry. The hostile reception from Trump appointees indicates the legal argument has genuine structural weaknesses independent of political alignment.

**Core exchange:**
- Judge Nelson focused on Rule 40.11: CFTC's own regulations prohibit DCMs from listing gaming contracts unless CFTC grants an exception
- Nelson's framing: prediction markets have two options — they can't do the activity at all, or they're regulated by the state. The federal authorization they claim either doesn't exist (gaming is prohibited on DCMs) or requires explicit CFTC permission (which hasn't been granted specifically for sports event contracts)

**Panel lean:** Consensus from legal observers and reporters at the argument: panel appears likely to rule for Nevada (against prediction markets). Nevada characterized sports event contracts as functionally identical to sportsbooks.

**Procedural context:** This is the MERITS appeal, not the prior February 2026 administrative stay ruling. The February ruling was a one-paragraph denial of Kalshi's stay motion. Today's argument is the dispositive case.

**Circuit split implications:** Combined with the 3rd Circuit's April 6 ruling for Kalshi (2-1, preliminary injunction for federal preemption), a 9th Circuit ruling for Nevada creates a confirmed circuit split. Supreme Court cert petition likely follows. Fortune (April 20) describes the case as "hurtling toward the Supreme Court."

**Scale context:** Total prediction market trading volume exceeded $6.5 billion in the first two weeks of April 2026. The Masters golf market alone reached $460M.

## Agent Notes

**Why this matters:** Bloomberg Law coverage provides independent confirmation of the panel's hostile posture and the likely ruling direction. The critical insight is the pattern update from Session 21: political alignment doesn't override legal reasoning when the argument has structural weaknesses. Even Trump-appointed judges in the expected-friendly circuit are applying legal reasoning that may doom the federal preemption argument.

**What surprised me:** The $6.5B in two-week April volume ($460M Masters alone) is much larger than my prior scale estimates. The markets are growing faster than the regulatory certainty timeline. This creates a mismatch between market size and regulatory durability — the stakes of a negative ruling are growing while the legal outcome remains uncertain.

**What I expected but didn't find:** Any signal that the CFTC attorney's arguments convinced any panel member. Not found. Minot's response to Nelson's Rule 40.11 framing (arguing the CFTC doesn't define sports contracts as "gaming") was apparently unpersuasive.

**KB connections:**
- [[futarchy is manipulation-resistant because attack attempts create profitable opportunities for arbitrageurs]] — not directly affected; this battle is about centralized DCMs
- Circuit split → SCOTUS cert claim gets DIRECTLY SUPPORTED by this article: "Fortune (April 20) describes case as 'hurtling toward the Supreme Court'"
- Pattern update for Belief #6: the political patronage pathway (Pattern 18) is weaker than previously assessed; legal argument quality matters even with friendly political appointees

**Extraction hints:**
- The $6.5B April volume / $460M Masters market data is strong for a market scale claim update
- The "political alignment doesn't override legal reasoning" finding is a pattern update worth capturing explicitly in the KB
- The pattern update on Trump-appointed judges applying hostile legal reasoning is important for correctly calibrating Belief #6's political pathway dependency

**Context:** Bloomberg Law is the premier legal news source. Their coverage reflects sophisticated legal interpretation from reporters covering federal appellate courts. High credibility for procedural and legal substance details.

## Curator Notes (structured handoff for extractor)
PRIMARY CONNECTION: [[prediction-market-scotus-cert-likely-by-early-2027-because-three-circuit-litigation-pattern-creates-formal-split-by-summer-2026-and-34-state-amicus-participation-signals-federalism-stakes-justify-review]]
WHY ARCHIVED: Confirms hostile panel posture from Trump appointees (political pathway more fragile than assumed); provides April 2026 volume data ($6.5B/two weeks); confirms circuit split trajectory
EXTRACTION HINT: Update the SCOTUS cert timeline claim with April volume data and circuit split confirmation. Also consider a claim about political alignment not overriding structural legal argument weaknesses.
