Meta description: Sixth Circuit ruling lets Ohio and Tennessee enforce gambling laws against Kalshi sports contracts while appeals continue.
Tags: Kalshi, CFTC, Sixth Circuit, Ohio Casino Control Commission, Tennessee Sports Wagering Council, Supreme Court
market_platform: Kalshi
category: Regulation
A unanimous Sixth Circuit panel ruled on Sept. 25 that Kalshi has not shown its sports-event contracts are swaps under the Commodity Exchange Act, allowing Ohio and Tennessee gambling regulators to proceed while both cases continue. The court affirmed Ohio’s preliminary-injunction win, vacated Kalshi’s Tennessee injunction, and remanded both cases for further proceedings.
The opinion in KalshiEX LLC v. Schuler and KalshiEX LLC v. Orgel was written by Judge Julia Smith Gibbons and joined by Judges Eric Clay and Rachel Bloomekatz. It is the latest appellate ruling over whether federal commodities law blocks state gambling enforcement against federally listed sports-event contracts.
The Sixth Circuit did not enter final judgment on the merits of state enforcement. It decided the preliminary-injunction posture, where Kalshi had to show a likelihood of success on its preemption theory. On that question, the court held that Kalshi had not carried its burden.
What did the Sixth Circuit decide about Kalshi’s sports contracts?
The Sixth Circuit held that Kalshi’s sports-event contracts do not qualify as swaps under the Commodity Exchange Act, at least on the preliminary-injunction record before the court. The panel focused on the statutory phrase requiring an event to be associated with a potential “financial, economic, or commercial consequence.”
In the court’s view, sports outcomes are different from the kinds of events Congress placed inside the swap framework. The opinion said an event must be intrinsically tied to a financial consequence, so that hedging financial risk or discovering prices would be “desired and beneficial.” Sports results, the panel concluded, do not fit that model merely because they may produce downstream economic effects for teams, sponsors, broadcasters, advertisers, or local communities.
That holding mattered because Kalshi’s core argument depends on the CFTC’s exclusive jurisdiction over swaps traded on designated contract markets. If the sports contracts are not swaps, the court said, state regulation of those contracts does not fall within the CFTC’s exclusive-jurisdiction provision.
The panel also supplied an alternative holding. Even if Kalshi’s sports-event contracts were swaps, the court said the Commodity Exchange Act would not expressly or impliedly preempt Ohio’s or Tennessee’s gambling laws. The court described the CEA’s special rule for event contracts as a backstop that gives the CFTC an additional review mechanism, not as a statute that strips states of their traditional gambling authority.
What happened in Ohio and Tennessee?
The two cases reached the Sixth Circuit from opposite district-court rulings. In Ohio, the Southern District of Ohio denied Kalshi’s request for a preliminary injunction against the Ohio Casino Control Commission. In Tennessee, the Middle District of Tennessee granted Kalshi a preliminary injunction against Tennessee officials after concluding that the company was likely to succeed on its preemption argument.
The Sixth Circuit left the Ohio result in place and reversed the practical effect of the Tennessee order. Its judgment affirmed the Ohio denial, vacated the Tennessee injunction, and remanded both cases for further proceedings. That means the litigation continues, but neither Ohio nor Tennessee is currently barred by those preliminary-injunction orders from applying state gambling laws to Kalshi’s sports-event contracts.
The opinion also rejected Kalshi’s argument that compliance with state-by-state restrictions, including geofencing, made state enforcement incompatible with federal law. Citing the Ohio district court, the Sixth Circuit said that “expensive does not mean impossible.”
Why did the court reject Kalshi’s preemption argument?
Kalshi argued that its sports-event contracts are federally regulated derivatives and that state gambling laws cannot be applied to them. The Sixth Circuit disagreed in two steps: first by rejecting the swap classification, and then by rejecting preemption even on Kalshi’s preferred assumption that the contracts were swaps.
On express preemption, the panel said the CEA’s exclusive-jurisdiction language does not operate as a broad bar on state gambling enforcement. On implied preemption, it found no field preemption and no conflict preemption. The court pointed to the CEA’s savings clauses and the absence of a sweeping preemption provision as signs that Congress did not intend to displace all state authority in this area.
The panel also emphasized that the CFTC’s ability to review certain event contracts does not make it the sole regulator of every contract a designated market lists. The opinion said the special rule expressly refers to activity that is unlawful under federal or state law, which the court read as evidence that Congress preserved a role for state law rather than eliminating it.
How does this affect the national circuit split?
The Sixth Circuit ruling deepens a split among federal appeals courts over Kalshi’s sports-event contracts and state gambling regulation. The Third Circuit ruled for Kalshi on April 6 in Flaherty v. KalshiEX, holding 2-1 that New Jersey’s enforcement was likely preempted at the preliminary-injunction stage. The Ninth Circuit ruled against Kalshi on Aug. 28 in KalshiEX LLC v. Assad, allowing Nevada enforcement to proceed and rejecting the company’s broader theory of CFTC exclusivity.
The Sixth Circuit now joins the Ninth Circuit in rejecting Kalshi’s position. Its opinion cited the Ninth Circuit’s Nevada decision and declined to follow the Third Circuit’s New Jersey approach on the key statutory question. A Maryland appeal in the Fourth Circuit remained a separate track when the Sixth Circuit issued its ruling.
The split is important because these cases are not only about Kalshi’s access to individual states. They test whether sports-event contracts listed on a CFTC-regulated market can operate nationwide despite state gambling regimes, or whether states may apply their own licensing and enforcement rules when the contracts function as sports wagering under state law.
Is the Supreme Court already involved?
Yes. The Supreme Court docket in Flaherty v. KalshiEX, No. 26-299, shows that New Jersey filed a petition for a writ of certiorari on Sept. 2 seeking review of the Third Circuit decision. The case was docketed Sept. 8, and Kalshi’s response deadline was extended from Oct. 8 to Nov. 9.
The Sixth Circuit decision gives the justices another appellate ruling on the same core question before Kalshi files its response. The Supreme Court docket also shows amicus activity from gaming-regulator groups, including the National Council of Legislators from Gaming States and a filing submitted by the International Association of Gaming Regulators and the North American Gaming Regulators Association.
For the prediction-market industry, the Supreme Court question is whether the CEA creates a national shield for sports contracts listed on designated contract markets. For states, the question is whether that reading would turn the CFTC into the effective national regulator of sports wagering without a clear congressional command.
What are the next dates for Kalshi?
Kalshi’s next immediate deadline in the Sixth Circuit is Oct. 9, the date for seeking rehearing. If no rehearing request changes the schedule, the mandate is expected to issue Oct. 16, which would make the Tennessee vacatur formally effective.
The larger date is Nov. 9, when Kalshi’s response is due at the Supreme Court in the New Jersey case. That filing will give the company its next full opportunity to defend the Third Circuit ruling and argue why the justices should or should not take up the dispute now.
Until then, the regulatory map remains fragmented. Kalshi has one favorable federal appellate ruling from the Third Circuit and adverse appellate rulings from the Ninth and Sixth Circuits. The Sixth Circuit’s decision leaves Ohio and Tennessee free from the preliminary injunctions Kalshi sought, while putting another primary-source appellate opinion in front of the Supreme Court before it decides whether to review the New Jersey case.
