Kalshi is gearing up for another legal battle in the Ninth Circuit, coinciding with significant developments at the Supreme Court. On September 8, the firm welcomed several new attorneys from Milbank to its legal team, just ahead of the deadline to request a rehearing regarding the Ninth Circuit's ruling on August 28, which permits Nevada to oversee Kalshi's sports-event contracts under state gaming regulations.
While the addition of these attorneys does not definitively indicate an impending en banc petition, it certainly raises eyebrows, especially with the rehearing deadline approaching. Legal expert Daniel Wallach noted the new appearances and speculated that Kalshi might be opting for a rehearing in the Ninth Circuit rather than seeking Supreme Court review.
Interestingly, Kalshi may not need to escalate the circuit split to the Supreme Court, as New Jersey has already initiated that process. On August 28, a Ninth Circuit panel ruled in favor of Nevada in the case of KalshiEX, LLC v. Assad, stating that Kalshi failed to demonstrate a likelihood of success in arguing that the Commodity Exchange Act preempts Nevada's regulatory authority over its sports contracts. The panel also determined that these contracts do not qualify as 'swaps' under the Commodity Exchange Act, a critical point since Kalshi's federal preemption argument hinges on its contracts being under the CFTC's exclusive jurisdiction.
However, this interpretation contradicts an earlier ruling from the Third Circuit, which affirmed that Kalshi's sports-event contracts indeed qualify as swaps and are likely protected from New Jersey's regulatory attempts by federal law. This divergence between the Ninth and Third Circuits creates a complex legal landscape, with two federal appellate courts offering conflicting interpretations on a vital federal law issue concerning the same entity and similar products.
As the Supreme Court has officially added New Jersey's cert petition to its docket (Case No. 26-299), Kalshi's response is due by October 8. Additionally, amicus briefs supporting New Jersey are also expected by that date. This development signals that the Supreme Court's involvement is no longer a mere possibility but a reality.