Two Circuits Now Disagree About Kalshi

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Two federal appeals courts have now read the same sentence of the Commodity Exchange Act and come to opposite conclusions about the same company’s product.

The Ninth Circuit ruled Friday that Kalshi’s sports event contracts are not swaps, affirming the dissolution of the injunction that had kept Nevada from enforcing its gaming laws. Judge Ryan Nelson wrote that whether the Super Bowl happens is the occurrence of an event, while whether a particular team wins it is the outcome of one, and that Kalshi’s broader reading “knows no limiting principle because anything could be defined as an event.” The Third Circuit held in April that the same contracts do qualify as swaps, leaving New Jersey preempted.

Kalshi now runs an identical product under state gaming enforcement in Nevada and federal shelter in New Jersey. Both rulings came on preliminary injunctions, and neither ends the underlying case. A split like this one, on a single company’s product, is the classic route to the Supreme Court.

Read more below!

REGULATION

Ninth Circuit Says Kalshi Sports Contracts Aren’t Swaps

The Ninth Circuit affirmed the dissolution of Kalshi’s Nevada injunction on Friday, holding that its sports event contracts fall outside the Commodity Exchange Act’s swap definition and so outside the CFTC’s exclusive jurisdiction. Judges Ryan Nelson, Bridget Bade and Kenneth Lee heard KalshiEX LLC v. Assad; Nelson wrote the opinion and Lee filed a concurrence. The panel also found Kalshi’s self-certification of the contracts unlawful under 17 C.F.R. § 40.11(a), the CFTC rule barring event contracts that involve, relate to or reference gaming. Nobody disputed that the contracts trade on a designated contract market, and the court held they are still not swaps. The ruling covers sports contracts only; Nevada’s challenge to Kalshi’s election contracts goes back to the district court.

Ninth Circuit Says Kalshi Sports Contracts Aren’t Swaps, Splitting With Third CircuitThe panel affirmed the dissolution of Kalshi’s Nevada injunction after finding no likely federal preemption, reaching the opposite preliminary conclusion from the Third Circuit.thedefiant.io

Why this matters: Kalshi now runs one product under two legal regimes: state gaming enforcement in Nevada, federal preemption in New Jersey. That conflict is what gets certiorari granted.

HACKS

Attacker Drains More Than $1 Million From Avici Users

An attacker was still draining customer funds from Avici, the Solana neobank issuing Visa cards backed by users’ crypto, at press time Friday. The attacker’s wallet held 10,005.03 SOL, worth about $1.07 million at 18:58 UTC, after adding roughly 2,595 SOL in the previous 11 minutes. The pattern repeats per victim across three instructions: SubmitSignatures on Avici’s authorization program, then AddCollateralAdmin and WithdrawCollateralAsset on its collateral program. Both programs are upgradeable and share one upgrade authority, which is a plain Solana account with no multisig on it. Avici posted at 18:42 UTC that it is “working directly with all relevant partners to resolve it,” one hour and 53 minutes after the first drain transaction, and has not said how many accounts are affected or whether it will make users whole. AVICI fell 49.4% to $0.2175, a record low.

Why this matters: Passkey authorization removed the seed phrase and left one upgrade key holding the whole system. Users posted about missing balances before Avici said anything.

BLOCKCHAINS

Solana Validators Approve Doubling Disinflation

SGP-0002 closed on Friday with 176.29 million SOL for, 66.19 million against and 20.63 million abstaining, or 72.7% support once abstentions are stripped out, past the two-thirds bar on 60.70% participation. Six hours before the close it sat at 65.4% and was failing. Kraken’s larger validator, holding 8,917,576 SOL, had voted 100% against on Friday morning, then re-cast at 10:37 UTC as 90.34% for, moving about 8.1 million SOL; Galaxy swung from 92% abstain to 58.36% for. The measure raises annual disinflation from 15% to 30%, removing an estimated 18.9 million SOL from emissions over six years and bringing Solana to its 1.5% terminal floor around the first half of 2029, three years ahead of the current schedule. Figment voted 17.07 million SOL against, Everstake 7.96 million.

Why this matters: Staking yields fall to 4.34% in year one against 4.93% under the old schedule, and the authors expect 30 validators unprofitable by year three.

MARKETS

Bitcoin Drops Below $78,000 After Warsh Speech

Bitcoin fell through $78,000 on Friday afternoon, giving up almost all of a weekly gain that had reached double digits, after Kevin Warsh’s first Jackson Hole address as Fed chair. “Here is my standard: We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed,” Warsh said. “Otherwise, we have work to do.” The 12-month change in the PCE price index stands at 3.7% and the six-month change at 4.1%. Bitcoin bottomed at $76,845.71 at 12:25 p.m. ET, 5.7% below its $81,479.50 overnight high, and last traded at $77,955. Gold fell 2.35% and the Nasdaq Composite 0.36%. Polymarket put the odds of no change at the September meeting at 69% and a quarter-point increase at 28%, against 1.7% for a cut. The symposium’s theme this year is financial innovation and payments; Warsh mentioned no stablecoins, tokenization or digital assets.

Why this matters: Two Jackson Hole speeches in a row rallied bitcoin about 5%. Warsh dislikes forward guidance, and traders now price a September hike at 28%.

DEFI

Ethena Plans Equity-Perpetual Basis Trades for USDe Backing

Ethena said Friday it will add equity-perpetual basis trades to USDe’s backing, extending the synthetic dollar into stock-linked derivatives. The first partner exchange announcements and deployments arrive “over the course of the next few weeks,” with no venues named and no current equity allocation disclosed. Ethena put equity perpetuals at more than $6 billion of open interest across 200 contracts, paying average funding rates of 15% to 20%, and projected that real-world-asset perpetuals will exceed crypto allocations in USDe’s backing within 12 to 24 months. Etherscan listed USDe circulating supply at about 4.063 billion tokens when checked. Binance’s TSLAUSDT perpetual showed about $41.0 million of open interest and Hyperliquid’s ORCL-USDC market about $16.1 million.

Why this matters: Ethena’s yield depends on funding rates it does not control. Equity perps pay 15% to 20% on average, and the size of the planned allocation is undisclosed.