Federal Court Rules Padres Partner Operates Illegal Gambling

A federal court has ruled that Kalshi, a brand partner of the Padres and other baseball teams, is illegally operating sports betting in California. This decision comes despite Kalshi’s self-description as a “next-generation financial exchange” offering futures contracts.

What Happened

The Ninth Circuit Court of Appeals recently ruled that Kalshi is illegally operating sports betting within California, as reported by KPBS. This ruling was issued just days after Kalshi announced in August its brand partnership with the Padres and three other prominent baseball teams, including the Dodgers (KPBS).

Kalshi describes itself as a “next-generation financial exchange” but functions similarly to a betting platform. Instead of customers betting against a casino’s sportsbook, Kalshi clients purchase futures contracts based on outcomes such as a team winning or losing, or other uncertain events, according to KPBS. The court’s decision challenges Kalshi’s argument that it operates as a designated contract market under the Commodity Exchange Act (CEA) rather than a legal sports betting platform, as stated in the Ninth Circuit ruling (KPBS).

Key Details

• Kalshi announced brand partnerships with the Padres, Dodgers, and two other baseball teams in August (KPBS).
• The Ninth Circuit Court of Appeals ruled that Kalshi is illegally operating sports betting in California (KPBS).
• Kalshi sought injunctive relief, contending it functions as a designated contract market under the Commodity Exchange Act (CEA), not a legal sports betting platform (KPBS).
• Judge Ryan D. Nelson cited Kalshi’s past advertisement as “the first app for legal sports betting in all 50 states” in his opinion (KPBS).
• The court opined that Kalshi users can effectively place prop bets, bet point spreads, or create multi-leg parlays, with payouts dependent on sports team or player performance, which are not legal in California (KPBS).
• Sports betting is not permitted in California, and two prior ballot measures aimed at legalizing it failed (KPBS).
• Nevada, which regulates sports betting, attempted to shut down Kalshi, leading to Kalshi’s lawsuit against the state (KPBS).
• Kalshi intends to appeal the court’s decision, potentially leading to a U.S. Supreme Court review (KPBS).
• Donald Trump Jr., reportedly a paid adviser to Kalshi, previously advised state attorneys general to cease investigations into the company (KPBS).

Why It Matters

This federal court ruling highlights the ongoing regulatory challenges faced by financial platforms that offer products resembling traditional sports betting, particularly in jurisdictions where such activities are prohibited. The case underscores the legal distinction between futures contracts and sports wagering, a critical area for operators in regulated markets. The partnership with prominent sports teams by a company deemed to be operating illegally also brings scrutiny to marketing practices within the sports industry (KPBS).

What’s Next

Kalshi plans to appeal the Ninth Circuit’s decision, potentially escalating the legal dispute to the U.S. Supreme Court (KPBS). Despite the ruling, Kalshi reportedly intends to proceed with its advertising and “exclusive on-site activations” for Padres fans interested in placing futures contracts on game outcomes or player performance (KPBS).

Originally reported by KPBS·Published 22 Sep 2026, 23:10