When a U.S. Ninth Circuit Court of Appeals three-judge panel ruled that Nevada could enforce its gambling laws on Kalshi’s sports event contracts Aug. 28, it opened the door for the eight other states in the circuit to do the same.
But with Kalshi’s request last Friday for an en banc hearing before additional judges on the court, that decision was stayed, a constitutional law professor told InGame, and most states cannot move forward with enforcement.
Kalshi’s filing buys the company time to continue offering its sports betting-like contracts during the busiest sports betting season of the year in the biggest state in the nation, as California is in the Ninth Circuit. It also stops states such as Arizona and Montana, which are involved in multiple court battles with the platform, from making another move at the federal level. In Arizona, a case brought by Kalshi’s regulator, the Commodity Futures Trading Commission (CFTC), has stopped all other court action, though the state has appealed to the Ninth Circuit to vacate the preliminary injunction.
And in Montana, a district court judge in late August denied Kalshi’s request for a preliminary injunction to continue to operate, but the state cannot enforce its rules with the en banc request for a fuller hearing pending.
Two states in the circuit — Nevada and Washington — are already enforcing their gambling restrictions after state courts ruled they could.
InGame last week contacted the offices of attorneys general in the circuit to find out what’s next. Those that replied said they were aware of the Ninth Circuit ruling and were considering next steps, but none shared plans to begin enforcement. Even if enforcement were in the works, it would have to be put on hold due to the en banc request made last Friday.
The Ninth Circuit includes Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington. It is the biggest appeals circuit in the U.S., with 29 judges. A three-judge panel unanimously upheld the previous district court ruling. Kalshi wants a bigger panel with 11 judges involved for the en banc proceeding.
29 of 625 rehearing appeals taken in ’24
There is no timeline for when the Ninth Circuit will determine if it will grant the hearing, but a key tell will be whether the court requests a response from the state of Nevada. Per the circuit court rules, responses are not permitted unless requested, and if a response is not requested, “Ordinarily, rehearing will not be granted in the absence of such a request.”
Should the court opt to move forward, the en banc panel could review existing court documents and rule, put the case on the calendar for a hearing, or “issue any other appropriate order.”
The Ninth Circuit rarely grants en banc hearings — per Complex Appellate Litigation Group, in 2024 625 en banc petitions were submitted, 29 were approved, and nine cases “succeeded.” To be granted an en banc hearing, the requestor must prove that the original decision showed a “clear and irreconcilable” conflict with Ninth Circuit law, created an inter-circuit split (which it did, as the Third Circuit ruled in Kalshi’s favor earlier this year), or put the Ninth Circuit in the minority on circuit splits.
Currently, there is a two-court circuit split between the Third and Ninth Circuits, while the Tenth Circuit last week denied Kalshi’s request for an emergency injunction to continue operating after a district court in Utah ruled that the state could enforce its gambling laws on Kalshi. The appellate court did not rule on whether the state could enforce its gambling laws over the long term, though it has been asked to.
Cases involving Kalshi and states are also sitting in the Second, Fourth, Sixth, and Seventh Circuit courts, and both the state of New Jersey and Robinhood have filed petitions for writs of certiorari to have the U.S. Supreme Court take up the issue. The first opportunity for the Supreme Court to determine if it will consider either case will be at its Sept. 28 “long conference” ahead of its session opening.
Per a Sept. 9 docket entry in the Third Circuit case between Kalshi and New Jersey, the Supreme Court received the petition and has placed it on the docket.
Status of states in court with Kalshi
Here’s a closer look at what’s going on in Ninth Circuit states that are in court with Kalshi.
Arizona: The state is in court with Kalshi and the CFTC on multiple fronts. The CFTC and Kalshi sued Arizona in U.S. District Court, and the state attorney general filed criminal charges in state court. While the AG’s office declined to comment due to the ongoing litigation, both the federal and state cases involving Kalshi are currently stayed. Arizona was the first state to bring criminal charges against Kalshi. The state could appeal the stay in federal district court by appealing to the Ninth Circuit or asking the district court judge to revisit the stay given the Ninth Circuit ruling. The federal district court issued an injunction that allows Kalshi to continue to operate and blocks the state-level criminal case from proceeding.
Montana: The deadline for the state to respond to Kalshi’s original complaint is Thursday. The initial complaint was filed five months ago, but both sides agreed to two 60-day extensions approved by the court. In late August, the district court ruled that because of the inaction and lack of argument, it must deny Kalshi’s request for a preliminary injunction.
Washington: A King County Superior Court judge on Aug. 13 ordered that Kalshi stop offering some of its contracts in the state effective Sept. 2. The order covers markets for sports, elections, politics, entertainment, culture, tech and science, or mentions, and it requires Kalshi to use a geofence to prevent the trades. Kalshi is also banned from advertising any of the listed markets, with the court writing that it believes that Kalshi knows it is trying to “skirt” the law and has used “unfair and/or deceptive acts or practices,” per a press release from the attorney general’s office. Kalshi appealed the decision in late August, saying the state is allowing other prediction platforms to offer the markets, and a hearing was scheduled for Sept. 2, but no decision has been issued.
