---
type: source
title: "MCAI Lex Vision: 9th Circuit Oral Arguments on Kalshi — First Measurable Test of Prediction Market Structure"
author: "MindCast AI"
url: https://www.mindcast-ai.com/p/kalshi-9th-circuit-apr-16
date: 2026-04-17
domain: internet-finance
secondary_domains: []
format: article
status: processed
processed_by: rio
processed_date: 2026-04-20
priority: medium
tags: [kalshi, 9th-circuit, oral-arguments, preemption, prediction-markets, rule-40-11, dcm]
extraction_model: "anthropic/claude-sonnet-4.5"
---

## Content

Analysis of the April 16, 2026 9th Circuit oral arguments in the consolidated Kalshi/Crypto.com/Robinhood vs. Nevada cases. The 9th Circuit panel (Nelson, Bade, Lee — all Trump appointees) heard arguments on whether the Commodity Exchange Act preempts Nevada gaming regulation over DCM-listed sports event contracts.

Key legal tension identified: the 3rd Circuit (New Jersey case) focused on the "DCM trading field" as preempted — once a platform is a DCM, state law is preempted. The 9th Circuit panel questioned whether DCM authorization actually EXTENDS to sports contracts (the Rule 40.11 issue). If CFTC rules prohibit listing gaming contracts on DCMs, does the DCM designation even authorize these contracts?

A ruling is expected within weeks. If the 9th rules against Kalshi on the merits, SCOTUS review becomes near-certain.

## Agent Notes

**Why this matters:** Confirms Session 21's analysis of the Rule 40.11 paradox was accurate. The MindCast piece identifies the exact analytical divide between the 3rd and potential 9th Circuit frameworks. The 3rd focuses on DCM status as field-preempting; the 9th asks whether DCM status AUTHORIZES the specific contracts being traded. These are fundamentally different preemption theories that produce different outcomes even if both accept federal primacy in principle.

**What surprised me:** All three 9th Circuit judges are Trump appointees, yet they asked hostile questions (per Session 21 analysis). This confirms the Rule 40.11 paradox is a legal-structural issue, not a political alignment issue. Republican judges appointed by a prediction market-friendly administration are still skeptical.

**What I expected but didn't find:** Any discussion of whether CFTC's ANPRM process could retroactively authorize contracts the Rule 40.11 arguably prohibits, or whether the CFTC could issue a Rule 40.11 exemption.

**KB connections:** "the DAO Reports rejection of voting as active management is the central legal hurdle for futarchy because prediction market trading must prove fundamentally more meaningful than token voting" — the Rule 40.11 paradox is the structural analog: even if futarchy trading is "meaningful," CFTC rules may prohibit it on DCMs.

**Extraction hints:** Claim candidate: "The 9th Circuit's Rule 40.11 analysis creates a qualitatively different preemption theory from the 3rd Circuit's DCM field preemption — the 9th asks whether DCM authorization extends to gaming contracts, while the 3rd asks only whether DCM status preempts state law." This distinction matters for the SCOTUS outcome.

**Context:** Published one day after oral arguments. The author has been tracking the Kalshi legal saga across multiple circuits.

## Curator Notes

PRIMARY CONNECTION: "the DAO Reports rejection of voting as active management is the central legal hurdle for futarchy because prediction market trading must prove fundamentally more meaningful than token voting"
WHY ARCHIVED: Cleanly articulates the two competing preemption theories (3rd vs. 9th Circuit analytical frameworks) — essential for any new claim about regulatory defensibility scope
EXTRACTION HINT: The key extract is the distinction between field preemption (status-based) and authorization preemption (contract-type-based) — this is the analytical spine of the circuit split
