Kalshi Makes Its Case for Federal Court as Ninth Circuit Hearing Tees Up Potential Supreme Court Review

The fight over whether prediction markets belong in federal or state court continues to intensify. In the span of two days last week, KalshiEX LLC filed its opposition to Michigan Attorney General Dana Nessel’s motion to remand the state’s enforcement action to state court, and a Ninth Circuit panel heard oral arguments in consolidated appeals by three prediction market platforms challenging Nevada’s enforcement of state gambling laws against event contracts traded on a Commodity Futures Trading Commission (CFTC or Commission) regulated designated contract market (DCM). Depending on the outcome, the Ninth Circuit case in particular could deepen the existing split among circuit courts and accelerate the path to Supreme Court review.

Keeping Michigan in Federal Court

Michigan is one of several states that have filed enforcement actions against prediction market platforms under state gambling statutes. Kalshi removed the case to federal court and now advances three independent bases for keeping it there.

1.  Federal Question Jurisdiction Under Grable

Michigan’s Lawful Sports Betting Act does not define “wagering” but expressly states that it “is consistent and complies with” the federal Unlawful Internet Gambling Enforcement Act of 2006, which excludes transactions conducted on registered entities under the Commodity Exchange Act (CEA). Kalshi argues that whether its contracts constitute “wagering” is therefore inherently a federal question. A federal court in Georgia Gambling Recovery LLC v. Kalshi Inc. (M.D. Ga. Feb. 2026) recently agreed, denying remand on Grable grounds under closely analogous circumstances.

2. Complete Preemption Under the CEA

Kalshi argues that because the CEA grants the CFTC “exclusive jurisdiction” over swap transactions traded on a DCM, this exclusivity is the hallmark of complete preemption. Courts around the country have reached conflicting conclusions on this question, and Kalshi’s opposition leans heavily on the decisions that have gone its way.

In the Third Circuit, the recent Flaherty decision supports Kalshi’s position, holding that the CEA “preempts otherwise applicable state laws that purport to regulate sports-related event contracts on CFTC-licensed DCMs.”[1] In the Fourth Circuit, a federal judge in Maryland ruled against Kalshi on similar grounds last summer, with oral arguments set for May. In the Sixth Circuit, Kalshi lost in Ohio but won in Tennessee, creating an intra-circuit split that the Sixth Circuit is now actively reviewing. 

Kalshi also invokes the Sixth Circuit’s reasoning in Ritchie v. Williams, which extended complete preemption to the Copyright Act based on exclusive federal jurisdiction and the need for national uniformity, a rationale that applies with similar force to the CEA.

3. Federal Officer Removal and Artful Pleading

Kalshi contends that Michigan deliberately omitted the CFTC from its suit even though the agency is actively litigating to prevent states from applying gambling laws to DCM-traded contracts. The Commission and the Department of Justice have filed suits against Arizona, Connecticut and Illinois, and a federal court has already granted a temporary restraining order (TRO) barring Arizona from enforcing substantively identical laws.[2]

The Ninth Circuit Hearing and the Path to Certiorari

The same week Kalshi filed its Michigan opposition, a Ninth Circuit panel heard oral arguments on April 16 in the consolidated appeals challenging Nevada’s enforcement of state gambling laws against DCM-traded event contracts.[3] The platforms’ counsel advanced the well-established preemption arguments, contending that the CEA’s grant of exclusive jurisdiction to the CFTC preempts state gambling regulation as applied to DCM-traded contracts, and that permitting a patchwork of state enforcement undermines the national uniformity the CEA was designed to ensure. The panel has considered the appeals and is expected to rule within 60 to 120 days.

The significance of this hearing extends beyond the Ninth Circuit. The significance of this hearing extends beyond the Ninth Circuit. With federal appellate courts already divided on preemption, a ruling against the platforms here would present a clear path to Supreme Court certiorari.