The Sixth Circuit ruled on September 25 that Kalshi has not shown it is likely to prove its sports event contracts are federally protected swaps. The unanimous panel affirmed the denial of preliminary relief in Ohio, vacated Kalshi’s preliminary injunction in Tennessee, and widened the appellate split over whether state gambling laws can reach CFTC-regulated prediction-market contracts.
What did the Sixth Circuit decide?
In KalshiEX LLC v. Schuler, No. 26-3196, and KalshiEX LLC v. Orgel, No. 26-5235, the U.S. Court of Appeals for the Sixth Circuit held that Kalshi had not carried its burden for preliminary injunctive relief against Ohio and Tennessee officials. Judge Julia Smith Gibbons wrote the opinion for the three-judge panel.
The court affirmed the Southern District of Ohio’s denial of Kalshi’s motion for a preliminary injunction. It also vacated the Middle District of Tennessee’s order granting Kalshi a preliminary injunction and remanded the Tennessee case for further proceedings. The ruling does not end the cases, but it removes Kalshi’s preliminary protection in Tennessee and leaves Ohio’s earlier denial in place.
The Sixth Circuit framed the dispute around two questions under the Commodity Exchange Act: whether sports event contracts are “swaps” that fall within the CFTC’s exclusive jurisdiction, and whether the CEA would preempt state gambling laws even if the contracts were swaps. The panel answered both questions against Kalshi at the preliminary-injunction stage.
“We hold that Kalshi has not shown that its sports-event contracts satisfy the statutory definition of a ‘swap’ so as to fall within the scope of the CFTC’s ‘exclusive jurisdiction,'” the Sixth Circuit opinion said. The panel added that, even assuming the contracts were swaps, the CEA does not expressly or impliedly preempt Ohio’s or Tennessee’s gambling laws.
Why did the court reject Kalshi’s swap argument?
The Sixth Circuit read the CEA’s swap definition more narrowly than Kalshi did. Kalshi argued that sports outcomes can have financial, economic, or commercial consequences for teams, leagues, broadcasters, sponsors, advertisers, athletes, and betting markets. The panel said those downstream consequences were too remote to make a sports result the kind of event Congress placed inside the swaps framework.
The court held that an event must be inherently associated with a financial consequence, in a way that makes the contract useful for transferring financial risk or producing price information that promotes market stability. Sports outcomes, the panel said, do not meet that test merely because a game can affect revenue, sponsorship value, media interest, or wagering activity elsewhere.
The panel also relied on the structure of the CEA. In the court’s view, nearby statutory language points to financial measures, indexes, instruments, and risks that market participants use for hedging or price discovery. Reading sports outcomes into that definition, the court said, would leave little limiting principle for excluding other chance-based contracts from CFTC exclusivity.
That reasoning tracks the Ninth Circuit’s August 28 decision in KalshiEX LLC v. Assad, where the court held that Kalshi had not shown a likelihood that the CEA preempts Nevada gaming regulations as applied to sports event contracts. The Ninth Circuit said Nevada was enforcing its own gaming laws rather than challenging a CFTC action under the Administrative Procedure Act.
How does this deepen the circuit split?
The Sixth Circuit’s decision creates a 2-1 appellate alignment against Kalshi on the preliminary-injunction question, with the Third Circuit on the other side. The split is not a final merits split after trial, but it is a direct disagreement among federal appellate courts over the same core statutory issue: whether sports event contracts traded on a CFTC-licensed designated contract market are swaps insulated from state gambling enforcement.
The Third Circuit ruled for Kalshi on April 6 in KalshiEX LLC v. Flaherty, affirming a preliminary injunction that bars New Jersey officials from enforcing state gambling laws against Kalshi’s sports-related event contracts while the case proceeds. The Third Circuit held that Kalshi had shown a reasonable chance of success on its argument that the CEA preempts New Jersey law from reaching sports contracts traded on a CFTC-licensed designated contract market.
The Ninth Circuit reached the opposite result in Nevada on August 28. In KalshiEX LLC v. Assad, that court affirmed the dissolution of Kalshi’s preliminary injunction as to sports event contracts, holding that Kalshi had not shown a likelihood that the CEA preempts Nevada’s gaming laws. The Ninth Circuit expressly disagreed with the Third Circuit’s treatment of sports event contracts under the swap definition.
The Sixth Circuit cited both rulings and noted that a Fourth Circuit appeal remains pending in KalshiEX LLC v. Martin, No. 25-1892. That case arises from Maryland, where the District of Maryland denied Kalshi’s motion for a preliminary injunction in August 2025. The next Fourth Circuit ruling will add another appellate data point to a dispute that is already positioned for Supreme Court attention.
Is the Supreme Court already involved?
Yes. New Jersey filed a petition for a writ of certiorari on September 2 in Flaherty v. KalshiEX, LLC, No. 26-299, asking the Supreme Court to review the Third Circuit’s ruling for Kalshi. That petition puts the swap-definition and preemption fight before the justices even before the Sixth Circuit and Fourth Circuit appeals fully play out.
A separate Supreme Court filing by Robinhood, submitted September 10 in a related Nevada dispute, also flags the conflict. Robinhood’s petition says the Third Circuit held that sports-related event contracts are swaps and that the CEA preempts state regulation of trading on designated contract markets, while the Ninth Circuit held the opposite in Nevada. The filing asks the Court to consider Robinhood’s petition alongside New Jersey’s if the justices take up the issue.
The Supreme Court has not yet decided whether to grant review. But the timing matters for the prediction-markets industry because the appellate cases are moving faster than the CFTC rulemaking process. The result is a legal map where federal courts, rather than a single agency rule, are defining the boundary between federally regulated event contracts and state-regulated sports wagering.
What has Kalshi said?
Kalshi disputed the Sixth Circuit’s reasoning. “The law does not require a swap to involve ‘intrinsic’ financial consequences, and even if it did, sports clearly do,” spokesperson Dani Lever told Courthouse News Service after the ruling.
That response reflects Kalshi’s broader position in the state enforcement fights. The company argues that it operates a CFTC-regulated designated contract market, that its event contracts fall within the CEA, and that state gambling regulators cannot use licensing and sports-wagering statutes to block trading on a federal exchange.
Ohio and Tennessee have taken the opposite view. The Sixth Circuit opinion describes Ohio’s gambling, nuisance, and sports-gaming statutes as the provisions Kalshi sought to block, and says the Tennessee Sports Wagering Council told Kalshi its sports event contracts involved accepting money risked on sporting outcomes without a valid Tennessee license. State regulators argue that federal commodities status should not let a platform avoid state sports-betting rules when the product is tied to game outcomes.
Why does this matter for prediction markets?
The fight is about more than Kalshi’s sports menu. If courts accept Kalshi’s theory, state gambling regulators could be limited in how they police sports event contracts listed on CFTC-licensed designated contract markets. If courts accept the states’ theory, platforms that list sports outcome contracts may need to contend with state-by-state gambling regimes even when they operate under federal commodities oversight.
The Sixth Circuit’s ruling is especially significant because it gives state regulators another appellate decision to cite after the Ninth Circuit’s Nevada win. At the same time, the Third Circuit’s New Jersey decision remains a live counterweight, and New Jersey’s Supreme Court petition means the issue is no longer confined to regional appellate courts.
The next concrete milestone is the Fourth Circuit’s pending decision in the Maryland appeal, followed by Supreme Court action on New Jersey’s September 2 certiorari petition. Until then, the legal status of sports event contracts remains tied to preliminary-injunction rulings that now point in different directions across the Third, Sixth, and Ninth Circuits.
