Kalshi May Be Headed Back to the Ninth Circuit. Meanwhile, New Jersey Has Already Taken the Fight to SCOTUS
New Jersey has already taken the circuit split to SCOTUS, giving Kalshi room to gamble on another round in the Ninth Circuit.
Kalshi appears to be staffing up for another round in the Ninth Circuit, and the timing is conspicuous. On Tuesday (September 8), several additional Milbank attorneys entered appearances for Kalshi in its Ninth Circuit litigation—just days before the deadline to seek rehearing of the court’s August 28 decision allowing Nevada to regulate Kalshi’s sports-event contracts under state gaming law.
The additions don’t prove that an en banc petition is coming. Lawyers enter cases for all sorts of reasons, and appellate tea-leaf reading remains an imperfect science. Still, adding appellate firepower with the rehearing clock approaching is the sort of docket activity that tends to get lawyers’ attention.
Daniel Wallach, a gaming-law attorney who has closely followed the prediction-market litigation, flagged the new appearances on September 9 and suggested that Kalshi “may be filing a petition for rehearing en banc in the Ninth Circuit instead of seeking cert from SCOTUS.”
There is another reason that strategy suddenly looks particularly interesting. Kalshi may not need to take the circuit split to the Supreme Court itself as New Jersey has already done it for them.
The Ninth Circuit Just Created A Clean Circuit Split
On August 28, a three-judge Ninth Circuit panel handed Nevada a significant victory in KalshiEX, LLC v. Assad, concluding that Kalshi had not established a likelihood of success on its argument that the Commodity Exchange Act preempts Nevada’s authority to regulate its sports-event contracts. More fundamentally, the Ninth Circuit concluded that the sports contracts at issue aren’t “swaps” under the relevant provisions of the CEA—a crucial finding because Kalshi’s federal-preemption theory depends heavily on its contracts falling within the CFTC’s exclusive regulatory jurisdiction.
There is, however, one small problem with the Ninth Circuit’s interpretation, which is that the Third Circuit already said essentially the opposite. In Kalshi’s New Jersey litigation, the Third Circuit concluded that Kalshi’s sports-event contracts qualify as swaps traded on a designated contract market and held that Kalshi was likely to succeed on its claim that federal law preempts New Jersey’s attempt to regulate them as gambling.
This isn’t merely two appellate courts stumbling into different results on different facts. The Ninth Circuit expressly considered the Third Circuit’s interpretation and rejected it. That leaves two federal courts of appeals giving incompatible answers to a nationally important question of federal law involving the same company and substantially the same product.
Supreme Court lawyers have a technical term for this.
They call it a good day.
New Jersey Has Already Taken That Split To SCOTUS
The timing became even more interesting on September 8, when the Supreme Court formally docketed New Jersey’s petition for certiorari as Flaherty v. KalshiEX, LLC. New Jersey filed the petition on September 2 after obtaining extensions from Justice Samuel Alito, the circuit justice for the Third Circuit. The Supreme Court docket now lists Kalshi’s response as due October 8.
That means the Supreme Court proceedings are no longer hypothetical. There is an actual cert petition, an actual docket number and an actual response date—and, importantly, Kalshi is the respondent.
That produces an unusual procedural alignment. Kalshi lost in the Ninth Circuit but won in the Third Circuit, and rather than having to take its Ninth Circuit defeat to Washington and persuade the Supreme Court to reverse it, New Jersey has already asked the justices to review the Third Circuit decision that Kalshi won.
That gives Kalshi an intriguing strategic possibility: play offense in San Francisco while playing defense in Washington.
New Counsel Points Toward A Possible En Banc Bid
Which brings us back to those September 8 appearances. The Ninth Circuit docket shows new appearances by Milbank attorneys Natasha Khan and Colleen Roh Sinzdak for Kalshi, followed by entries formally adding them as counsel. That is not proof of an impending rehearing petition, but appellate counsel appearing shortly before a rehearing deadline does not exactly discourage speculation.
If Kalshi does seek rehearing en banc, the strategy is easy enough to understand. Rather than immediately asking the Supreme Court to review its Ninth Circuit loss, Kalshi can first ask a larger group of Ninth Circuit judges to reconsider the panel’s decision. The upside is equally straightforward: Kalshi might win.
If rehearing is granted and the Ninth Circuit reverses or substantially narrows the panel’s reasoning, Kalshi could erase—or at least diminish—a published adverse precedent governing a large portion of the western United States. It might even eliminate the circuit split altogether.
Normally, destroying your own Supreme Court-worthy circuit split would be a curious strategy.
But when your opponent has already filed the cert petition, the calculation gets considerably more interesting.
Kalshi Can Attack Its Loss While Defending Its Win
Kalshi doesn’t currently need Assad to be the vehicle that brings this issue to the Supreme Court because Flaherty is already there. That gives Kalshi several possible paths: it can seek rehearing in the Ninth Circuit while opposing New Jersey’s cert petition, or it could decide that Supreme Court review is now desirable and respond accordingly. Depending on how the Ninth Circuit proceedings develop, it could also argue that the justices should account for those developments when deciding what to do with Flaherty.
The important point is that Kalshi no longer has to manufacture a route to the Supreme Court. New Jersey has supplied one—and from a case in which Kalshi won below.
To be fair, there are worse litigation arrangements.
The Circuit Split Gives Rehearing An Institutional Hook
An en banc petition would also give Kalshi a stronger institutional argument than the usual “three judges got this wrong.” Kalshi can essentially tell the Ninth Circuit: Another federal court of appeals interpreted the same federal statutory scheme the opposite way, and your panel expressly rejected that interpretation. The result is now conflicting federal law governing a nationwide market.
That is the sort of argument Federal Rule of Appellate Procedure 35 was designed to accommodate. En banc rehearing is disfavored and rare, but conflicts involving questions of exceptional importance are precisely the territory in which parties ask for it. And the disagreement here is unusually clean: the Third Circuit treated Kalshi’s sports-event contracts as swaps within the CEA framework, while the Ninth Circuit rejected that reading, concluding that interpreting “event” broadly enough to encompass sports wagers failed to account properly for statutory context.
This is not a split requiring a 14-page chart and three colors of highlighter to discover.
The courts disagree.
En Banc Could Help Kalshi—Or Produce An Even Worse Opinion
There is also a possible secondary benefit to seeking rehearing. Suppose the Ninth Circuit denies Kalshi’s petition, but several judges dissent from the denial. Kalshi would then have a particularly attractive package to present in Washington: the Third Circuit adopted its interpretation, the Ninth Circuit rejected it, and judges within the Ninth Circuit publicly argued that the panel got the federal question wrong.
That could help, but Kalshi shouldn’t order the champagne based on that scenario. The Ninth Circuit could simply deny rehearing without comment, leaving Kalshi to spend additional time obtaining the appellate equivalent of “no.”
Or the court could grant rehearing and ultimately issue a more comprehensive en banc opinion against Kalshi. Instead of asking the Supreme Court to reject the reasoning of one three-judge panel, Kalshi could find itself staring at a lengthy opinion from a much larger collection of Ninth Circuit judges explaining exactly why Nevada should win.
More judges do not invariably produce more happiness.
Neither Case Is A Perfect Supreme Court Vehicle
The Ninth Circuit’s decision arose from preliminary-injunction proceedings rather than a final judgment on the merits, which can give the Supreme Court a reason to wait for further proceedings before intervening. At first glance, that might seem to make New Jersey’s case the cleaner Supreme Court vehicle.
Except there is a catch: Flaherty is also a preliminary-injunction case. The Third Circuit reviewed an order granting preliminary relief to Kalshi, while the Ninth Circuit reviewed the dissolution of preliminary relief against Nevada. So neither case arrives at One First Street dressed in a pristine final-judgment tuxedo; both are showing up in interlocutory business casual.
That doesn’t prevent Supreme Court review, particularly given the direct circuit conflict. But it does mean the New Jersey case isn’t automatically the superior vehicle merely because Assad remains in an interlocutory posture.
The Ninth Circuit Deadline Arrives First
The practical significance of the latest docket activity is timing. Kalshi’s rehearing window in the Ninth Circuit is closing, with Wallach identifying Friday as the deadline for a rehearing petition. Meanwhile, the Supreme Court has docketed New Jersey’s petition and set Kalshi’s response for October 8. According to Wallach, amicus briefs supporting New Jersey—including briefs from tribes—are also expected by that date.
Kalshi could therefore soon be litigating the same fundamental federal question on two appellate fronts at once: asking the Ninth Circuit to reconsider the decision it lost while simultaneously telling the Supreme Court what it should do with the decision it won.
This sounds messy.
For appellate lawyers, it’s a normal Tuesday.
New Jersey’s Petition Gives Kalshi The Luxury Of Another Shot
Usually, a company confronted with a damaging circuit split must decide whether to take its loss to the Supreme Court and persuade the justices that the issue warrants immediate intervention. Kalshi may not have to do that because New Jersey has already walked into the Supreme Court, pointed to the conflict and asked the justices to resolve it.
That leaves Kalshi free, at least for the moment, to concentrate on whether it can make the Ninth Circuit problem disappear. If the Ninth Circuit grants rehearing and Kalshi ultimately wins, the adverse precedent could disappear or materially change. If rehearing is denied with a vigorous dissent, Kalshi could gain useful ammunition for the Supreme Court fight. If rehearing is denied quietly, the circuit split remains.
And if the Supreme Court grants New Jersey’s petition, Kalshi gets to litigate the core statutory question as the party defending a judgment in its favor rather than as the party asking the justices to rescue it from the Ninth Circuit. None of those scenarios guarantees a happy ending for Kalshi, but collectively they explain why an en banc petition could make considerable strategic sense.
Kalshi Can Try To Erase Its Loss While New Jersey Takes The Split To Washington
The August 28 Ninth Circuit decision was unquestionably a serious setback for Kalshi. A federal appellate court rejected the statutory theory underpinning its effort to keep Nevada’s gaming regulators away from its sports-event contracts—and expressly disagreed with another federal appellate court in the process.
Eleven days later, Kalshi added appellate lawyers to the case with the rehearing deadline approaching. One day earlier, the Supreme Court docketed New Jersey’s petition asking the justices to review the other side of that newly minted circuit split.
Coincidence? Quite possibly. Docket watchers aren’t clairvoyants. But if Kalshi files an en banc petition by Friday, the strategy won’t be difficult to decipher: try to erase the Ninth Circuit loss while New Jersey does the work of putting the underlying legal question before the Supreme Court.
Kalshi, after all, built a business around letting people trade on uncertain future events. For the next few days, one of the more interesting contracts might be:
Will Kalshi file for rehearing en banc by Friday?
Unfortunately for the lawyers involved, that one probably isn’t listed.
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