The 9th U.S. Circuit Court of Appeals on Friday told Kalshi it had to stay out of Nevada, providing a victory for the state's gaming regulators.

In a unanimous ruling issued by a three-judge panel, the court determined that U.S. District Judge Andrew Gordon did not abuse his discretion when he changed his opinion and allowed the Nevada Gaming Control Board to ban the unlicensed prediction market from offering sports betting contracts in the state.

In its decision, the court rejected Kalshi's argument that it was impossible to comply with Nevada law and the Commodity Exchange Act (CEA) simultaneously and that Nevada law posed an obstacle to the CEA's purposes. 

"Because we disagree with Kalshi's overly broad reading of the CEA, and because (Commodity Futures Trading Commission) CFTC regulations currently prohibit offering contracts related to gaming on prediction markets, we affirm the district court's order dissolving the injunction as to sports event contracts," Judge Ryan Nelson wrote.  

Kalshi and other prediction markets have been banned by gaming regulators and courts in several states, saying a 2018 decision by the U.S. Supreme Court gave states the right to regulate sports betting. Industry analysts believe the Supreme Court will ultimately decide the issues surrounding prediction markets.

The ruling was applauded by gaming industry leaders.

In a statement, American Gaming Association CEO Bill Miller said the decision was "a significant win for consumer protections and taxpayers. It is a big loss for Kalshi and other backdoor sports gambling operations who defy state laws."

Nelson added that "in dissolving the preliminary injunction, (Gordon) did not abuse (his) discretion in analyzing whether Kalshi showed that it was likely to suffer irreparable harm and that an injunction was both equitable and in the public interest." 

The panel affirmed part of the court order that allowed gaming regulators to enforce state laws against Kalshi's sports-related event contracts. The panel sent the case back to the district court to consider Nevada's challenges to Kalshi's election contracts so they are consistent with the opinion. 

The decision comes more than five months after the judges heard nearly two hours of oral arguments in San Francisco by attorneys involved in the control board's lawsuits against Kalshi and prediction market operators Crypto.com and Robinhood Derivatives. 

Washington, D.C., attorney Nicole Saharsky, who represented Nevada gaming regulators, said at the hearing the cases constitute "a severe intrusion on state sovereignty. Their position is that all sports bets would qualify as swaps. That would make the (Commodity Futures Trading Commission) CFTC the nation's gaming regulator." 

Saharsky said the challenges to state gaming laws would effectively nullify the 2018 U.S. Supreme Court ruling that allowed individual states to legalize sports betting. 

During the April hearing, the judges appeared skeptical of arguments by attorneys for Kalshi and two other prediction markets that Nevada gaming regulators are unfairly keeping the businesses out of the state. 

"Explain to me the difference between a sports bet that happens in Caesars and a sports bet with [a prediction market]?" Nelson asked an attorney for Crypto.com. "The waters have been muddied, but that happens all the time." 

Judge Kenneth Lee, writing in a concurrent opinion, suggested a statutory provision "appears to give the CFTC discretion" on banning gaming contracts. But the statute does not seem to categorically bar all gaming contracts.  

"However, this question of statutory interpretation need not be resolved now because (the Code of Federal Regulations) currently bars gaming contracts," Lee wrote.