A federal appeals court panel on Friday refused to let prediction market operator Kalshi restart trading on sports and elections events in Nevada while it fights the state's effort to shut it down until it gets a license from state gambling regulators.

A panel of judges from the 9th U.S. Circuit Court of Appeals in San Francisco ruled that Kalshi didn't make a persuasive argument that federal commodities trading law preempts Nevada's state gambling law in determining who should regulate its sporting events business. Instead, the panel said that federal law likely does not preempt Nevada — home to the nation’s biggest commercial casino market — from applying its gambling regulations to Kalshi’s sports event contracts.

Nevada's attorney general's office called the ruling a “major victory for Nevada and our longstanding authority to regulate gaming in our state.” Kalshi “sought to sidestep” Nevada’s laws, but the 9th Circuit “made clear what we have maintained from the beginning: sports betting does not become something else simply because a company calls it an ‘event contract,’ ” the office said in a statement.

The 9th Circuit panel sent the question of Kalshi's trading on election contracts back to a lower court to consider Nevada’s challenges.

Roughly 20 states are involved in litigation over prediction markets like those run by Kalshi, Polymarket and Robin Hood. Friday's decision raises the likelihood that the U.S. Supreme Court will eventually settle the question as to whether states can regulate them under their gambling laws after the Philadelphia-based 3rd U.S. Circuit Court of Appeals ruled earlier this year that New Jersey couldn't regulate Kalshi.

In a statement, Kalshi said it will seek further review of the decision. In the meantime, trading on sports, entertainment and elections contracts are blocked in Nevada, Kalshi has said.

Kalshi had sought to resume operating in Nevada while the court case goes on, and argued that it is not a betting platform, but rather a “designated contract market” subject to regulation by the federal Commodity Futures Trading Commission, and not the Nevada Gaming Control Board.

As the regulator of commodities, futures and derivatives, the CFTC has historically overseen markets like oil futures, agricultural products, gold, and other financial products.

Nevada's gaming board last year sent a cease-and-desist letter to Kalshi, telling it that trading on sporting events and election outcomes is “unlawful in Nevada” and ordering it to shut down.

Kalshi sued in federal court, and a judge initially granted a preliminary injunction preventing Nevada from taking action against it. But the judge later dissolved the injunction, prompting an appeal by Kalshi.

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