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Sixth Circuit Lets Ohio and Tennessee Enforce Gambling Laws Against Kalshi Sports Contracts

A unanimous Sixth Circuit panel held on September 25 that Kalshi's sports-event contracts fall outside the Commodity Exchange Act's swap definition and that federal law does not preempt Ohio or Tennessee gambling statutes, deepening a split with the Third Circuit.

Naomi Castellan
Naomi Castellan
· 6 min read · 72 reads
Sixth Circuit Lets Ohio and Tennessee Enforce Gambling Laws Against Kalshi Sports Contracts




The U.S. Court of Appeals for the Sixth Circuit ruled September 25, 2026, that Kalshi’s sports-event contracts are not swaps under the Commodity Exchange Act, allowing Ohio and Tennessee to enforce state gambling laws against the exchange. The published opinion covered two appeals, KalshiEX LLC v. Schuler, No. 26-3196, and KalshiEX LLC v. Orgel, No. 26-5235.

The ruling affirmed an Ohio district court’s denial of a preliminary injunction and vacated a Tennessee injunction Kalshi had won in February. It also deepened a federal appellate split over who gets to police sports event contracts: state gambling regulators or the Commodity Futures Trading Commission.

Kalshi has now lost on that issue in two appellate courts in less than a month. The Ninth Circuit sided with Nevada regulators in KalshiEX LLC v. Assad on August 28, 2026. The Third Circuit, in KalshiEX LLC v. Flaherty, held in April that Kalshi had shown a likelihood of success on its argument that federal law preempts New Jersey’s gambling laws. New Jersey’s Supreme Court petition is docketed as No. 26-299, with Kalshi’s response due November 9, 2026.

What did the Sixth Circuit decide?

Judge Julia Smith Gibbons, joined by Judges Eric Clay and Rachel Bloomekatz, framed the case around three issues. The court held that Kalshi could sue to challenge state enforcement, that its sports-event contracts do not meet the CEA’s statutory definition of a swap, and that the CEA would not preempt Ohio and Tennessee gambling laws even if the contracts were swaps.

The swap analysis centered on 7 U.S.C. § 1a(47)(A)(ii), which covers contracts whose payment depends on an event associated with a potential financial, economic, or commercial consequence. The Sixth Circuit agreed with Kalshi that a sports result can be an event. It rejected, however, Kalshi’s broader argument that sports outcomes qualify because professional sports are tied to money for leagues, advertisers, sponsors, broadcasters, franchises and local economies.

The court said the statutory phrase requires a closer relationship between the event and the financial consequence. In the panel’s formulation, the event must be intrinsically associated with a financial consequence in a way that explains why hedging risk or learning price information about that event would be useful. Interest rates fit that model. The court said Super Bowl MVP, corner kicks in a soccer game and whether an announcer says a particular word on air do not.

Why did the court reject Kalshi’s sports-economy argument?

Kalshi argued that sports outcomes carry financial consequences for sponsors, advertisers, television networks, franchises and local communities. The Sixth Circuit called that link too attenuated and said Kalshi’s reading had no workable limiting principle.

The opinion used Kalshi’s own examples and litigation record to make the point. According to the court, Kalshi had offered or described contracts involving the number of corner kicks in a soccer match, whether a broadcaster says a specified word, and multi-leg sports propositions. The panel said those products were not meaningfully comparable to instruments traditionally understood as swaps.

The court also relied on concessions from Kalshi’s counsel. At oral argument, the opinion said, Kalshi acknowledged that a layperson might find it hard to see how some contracts carried economic consequences. The opinion also pointed to prior statements in the Nevada litigation that Kalshi’s sports-event contracts had no inherent economic significance and carried no economic risks.

A broader concern shaped the court’s reading of the statute. The CEA makes it unlawful for most people to enter into swaps outside a designated contract market. If ordinary sports bets were swaps, the panel reasoned, wagers at casinos, online sportsbooks or between private individuals could be swept into federal commodities law. The Sixth Circuit said that result weighed against Kalshi’s interpretation.

Does CFTC jurisdiction block state gambling laws?

No, the Sixth Circuit said. The panel held that the CEA’s exclusive-jurisdiction clause, 7 U.S.C. § 2(a)(1)(A), does not broadly displace state gambling laws. The court read the provision as allocating regulatory authority over swaps and designated contract markets, not as a general shield against state laws that incidentally affect a CFTC-regulated exchange.

The court contrasted that language with other CEA provisions that expressly use preemption wording, including 7 U.S.C. § 16(e)(2). In the Sixth Circuit’s view, Congress knew how to write a direct preemption clause and did not use that wording in the exclusive-jurisdiction provision at issue.

The panel did recognize a narrower federal sphere. State rules that directly regulate the licensing or operation of designated contract markets can be displaced. But Ohio and Tennessee gambling laws, as applied to Kalshi’s sports contracts, did not directly target DCM licensing or operations, the court said. Field preemption and conflict preemption failed for similar reasons.

How did Ohio and Tennessee get to the Sixth Circuit?

Kalshi self-certified its first sports-event contracts with the CFTC on January 22, 2025, according to the Sixth Circuit opinion. Ohio regulators later sent a cease-and-desist letter accusing the exchange of unlicensed sports gaming and warned licensed sportsbooks about associating with Kalshi. Kalshi sued in the Southern District of Ohio, Case No. 2:25-cv-01165, where Chief Judge Sarah Daggett Morrison denied a preliminary injunction.

A Sixth Circuit motions panel refused to enjoin Ohio while the appeal was pending. In an April 24, 2026 order cited by the merits panel, the court said Kalshi had shown at most that the merits were in equipoise, which was not enough to block Ohio’s gambling laws pending appeal.

Tennessee followed a different procedural path. The Tennessee Sports Wagering Council sent its own cease-and-desist letter in early 2026. Kalshi sued in the Middle District of Tennessee, Case No. 3:26-cv-00034, and Judge Aleta Arthur Trauger granted a preliminary injunction on conflict-preemption grounds. Tennessee officials appealed, and the Sixth Circuit heard the Tennessee and Ohio cases together.

The CFTC appeared as an amicus in the Ohio appeal. Other amici included the Nevada and Utah attorneys general, the Yuhaaviatam of San Manuel Nation, Better Markets and the Coalition for Prediction Markets. The panel acknowledged the coalition’s argument that prediction markets can provide economic information, but said the cited sports hedging examples did not show that Kalshi’s sports contracts were commonly used to hedge financial risk.

What does Kalshi say now?

Kalshi disagreed with the ruling and said it expected further review. Spokesperson Dani Lever told The Block that the law does not require a swap to involve intrinsic financial consequences and argued that sports have clear economic effects. Lever also said a state-by-state regime is incompatible with a national market structure.

The immediate legal map is uneven. The Third Circuit has sided with Kalshi against New Jersey. The Ninth Circuit has sided with Nevada. The Sixth Circuit has now sided with Ohio and Tennessee. The Fourth Circuit appeal involving Maryland, KalshiEX LLC v. Martin, No. 25-1892, remains another pending front in the same fight.

The Supreme Court docket in Flaherty v. KalshiEX LLC now includes New Jersey’s petition, several amicus filings and an October 7, 2026 amicus brief submitted by Ohio, 38 other states and the District of Columbia. The next fixed milestone is November 9, 2026, when Kalshi’s response to New Jersey’s petition is due.

For Ohio and Tennessee, the practical effect is immediate. The injunction against Tennessee is gone, Ohio’s denial of an injunction stands, and the Sixth Circuit opinion states that Kalshi does not currently comply with either state’s gaming laws.

#CFTC #Commodity Exchange Act #Kalshi #Ohio Casino Control Commission #Regulation #Sixth Circuit #Supreme Court #Tennessee Sports Wagering Council
Naomi Castellan
Written by
Naomi Castellan

Naomi Castellan covers regulation and legal fights shaping the prediction markets industry for Prediction Express, tracking CFTC rulemaking, Federal Register filings, and the state-versus-federal court battles over event contracts. She has spent nine years reporting on derivatives and commodities regulation.

More by this author →

Sixth Circuit Lets Ohio and Tennessee Enforce Gambling Laws Against Kalshi Sports Contracts

A unanimous Sixth Circuit panel held on September 25 that Kalshi has not shown its sports contracts are federally regulated swaps. The ruling lets Ohio and Tennessee enforce their gambling laws and makes it more likely the Supreme Court will take up the issue.

Naomi Castellan
Naomi Castellan
· 6 min read · 16 reads
Sixth Circuit Lets Ohio and Tennessee Enforce Gambling Laws Against Kalshi Sports Contracts

Meta description: The Sixth Circuit ruled Kalshi did not show its sports contracts are swaps, clearing Ohio and Tennessee enforcement fights.

Tags: Kalshi, CFTC, Ohio, Tennessee, Sixth Circuit, Supreme Court

market_platform: Kalshi

category: Regulation

The U.S. Court of Appeals for the Sixth Circuit ruled on September 25 that Kalshi had not shown its sports event contracts qualify as “swaps” under federal commodities law, allowing Ohio and Tennessee to enforce their gambling laws against the exchange. The decision makes Kalshi’s state-law fight harder and deepens a federal appeals-court split now before the U.S. Supreme Court.

The three-judge panel affirmed Ohio’s district-court win and vacated a preliminary injunction Kalshi had obtained against Tennessee. Judge Julia Smith Gibbons wrote the Sixth Circuit opinion. The ruling is the second federal appellate decision in less than a month to reject Kalshi’s argument that its CFTC-regulated status blocks state gambling enforcement against sports event contracts.

What did the Sixth Circuit decide about Kalshi’s sports contracts?

The Sixth Circuit rejected Kalshi’s central position that its sports event contracts are swaps under the Commodity Exchange Act. “We hold that Kalshi has not shown that its sports-event contracts satisfy the statutory definition of a ‘swap,'” the court wrote in its September 25 opinion.

That holding matters because Kalshi’s defense against state regulators turns on federal preemption. Kalshi argues that contracts listed on its Commodity Futures Trading Commission-designated contract market fall under exclusive federal oversight, leaving states unable to treat the same products as illegal sports betting.

The Sixth Circuit also gave an alternative reason for its decision. Even if Kalshi’s contracts were swaps, the court wrote, the Commodity Exchange Act would not expressly or impliedly preempt Ohio’s or Tennessee’s gambling laws. The panel said the state laws regulate sports betting and apply to Kalshi only because of the exchange’s choice to list sports event contracts.

The opinion questioned whether several listings had the economic character Kalshi attributed to them. The panel cited examples beyond game-outcome contracts, including sports-adjacent markets tied to events during broadcasts, and said Kalshi had not shown why those contracts fit the federal swaps definition.

How did the Ohio and Tennessee cases reach the appeals court?

The Ohio and Tennessee cases arrived at the Sixth Circuit from opposite district-court rulings. In Ohio, Chief Judge Sarah D. Morrison of the U.S. District Court for the Southern District of Ohio denied Kalshi’s request for a preliminary injunction in March 2026. That order left Ohio regulators free to proceed under state gambling law.

In Tennessee, U.S. District Judge Aleta A. Trauger reached the opposite result in February 2026, granting Kalshi a preliminary injunction that blocked state gambling enforcement while the case continued. The Sixth Circuit’s September 25 opinion aligned the two cases by affirming Ohio’s order and vacating Tennessee’s injunction.

Ohio and Tennessee both argued that Kalshi’s sports event contracts function as unlicensed sports wagering when offered to residents without state gambling approval. The Sixth Circuit did not need to decide every question in the underlying cases. At the preliminary-injunction stage, it held that Kalshi had not made the showing required to keep state enforcement on hold.

How did Kalshi respond to the ruling?

Kalshi disputed the court’s treatment of economic significance. “The law does not require a swap to involve ‘intrinsic’ financial consequences, and even if it did, sports clearly do,” spokesperson Dani Lever said in a statement quoted by The Block. Lever said the decision showed why “a state-by-state patchwork doesn’t work.”

That response tracks Kalshi’s broader regulatory argument: sports event contracts should be governed by the CFTC as federally regulated event contracts, not by separate state gambling regimes. The position carries direct business consequences. If Kalshi prevails on federal preemption, it can continue pursuing national sports-contract listings through its CFTC-regulated exchange model. If states prevail, Kalshi faces licensing, enforcement, tax, and product restrictions that vary by jurisdiction.

The commercial stakes are substantial. The Block reported that Kalshi recorded $38.67 billion in trading volume in August 2026. The Sixth Circuit ruling does not decide Kalshi’s final liability in Ohio or Tennessee, but it strengthens state regulators’ leverage while the broader legal question moves toward Supreme Court review.

Where does the circuit split stand now?

Three federal appeals courts have now ruled on whether Kalshi’s sports contracts are protected from state gambling enforcement by federal commodities law. One has sided with Kalshi, while two have sided with state regulators.

Third Circuit: In April 2026, a divided panel in KalshiEX LLC v. Flaherty found at the preliminary-injunction stage that federal law likely preempted New Jersey’s sports-gambling enforcement because Kalshi’s contracts likely qualified as swaps. New Jersey has asked the Supreme Court to review that ruling.

Ninth Circuit: On August 28, 2026, the Ninth Circuit affirmed an order dissolving Kalshi’s injunction against the Nevada Gaming Control Board. “The substance of the sports event contracts offered on Kalshi’s DCM is sports gambling, regardless of whether Kalshi calls them swaps,” Judge Ryan D. Nelson wrote in the published opinion. The Ninth Circuit also cited CFTC Regulation 40.11(a), which bars designated contract markets from listing contracts tied to gaming, as a separate obstacle to Kalshi’s position.

Sixth Circuit: On September 25, 2026, the Sixth Circuit ruled against Kalshi in the Ohio and Tennessee appeals, holding that Kalshi had not shown its sports event contracts meet the statutory definition of swaps and that state gambling laws would not be preempted even if they did.

A Fourth Circuit case involving Maryland’s gambling law remains pending, according to The Block. Its outcome could either add another state-regulator win or create a more even split before the Supreme Court acts.

Will the Supreme Court take the Kalshi case?

The Supreme Court already has the issue in front of it. On September 2, New Jersey Attorney General Jennifer Davenport and Mary Jo Flaherty, interim director of the New Jersey Division of Gaming Enforcement, filed a petition for a writ of certiorari asking the justices to reverse the Third Circuit’s pro-Kalshi ruling.

The petition asks whether the 2010 Dodd-Frank Act prevents states from regulating sports wagers placed within their borders when the same transactions are structured as contracts on a CFTC-registered market. That question goes to the center of Kalshi’s sports strategy and to the boundary between federal derivatives regulation and state gambling authority.

The Court has not agreed to hear the case. The Sixth Circuit ruling gives New Jersey and other state regulators a stronger argument that the federal appeals courts are divided on an important recurring question. It also gives the justices two possible paths if they take the case: the definition of “swap” and the separate question of whether the Commodity Exchange Act preempts state gambling laws.

What happens next for Kalshi in Ohio and Tennessee?

Ohio and Tennessee can proceed with gambling-law enforcement against Kalshi’s sports event contracts while the underlying district-court cases continue. Kalshi can seek rehearing by the full Sixth Circuit, ask the Supreme Court to review the Sixth Circuit decision later, or focus on the already pending New Jersey petition.

The next central milestone is the Supreme Court’s response to New Jersey’s certiorari petition in KalshiEX LLC v. Flaherty. Until then, Kalshi faces a split legal map: one federal appeals court has accepted its preemption theory at the preliminary stage, while the Ninth and Sixth Circuits have allowed state gambling regulators to move forward.

#Brazil #CFTC #Kalshi #Ohio #Regulation #Sixth Circuit #Supreme Court #Tennessee
Naomi Castellan
Written by
Naomi Castellan

Naomi Castellan covers regulation and legal fights shaping the prediction markets industry for Prediction Express, tracking CFTC rulemaking, Federal Register filings, and the state-versus-federal court battles over event contracts. She has spent nine years reporting on derivatives and commodities regulation.

More by this author →

Sixth Circuit Lets Ohio and Tennessee Enforce Gambling Laws Against Kalshi Sports Contracts

The Sixth Circuit ruled Sept. 26 that Ohio and Tennessee can regulate Kalshi under state gambling law, a third straight appellate loss even as fan sites promote its Texas-Tennessee contracts.

Naomi Castellan
Naomi Castellan
· 6 min read · 7 reads
Sixth Circuit Lets Ohio and Tennessee Enforce Gambling Laws Against Kalshi Sports Contracts




The Sixth Circuit ruled on September 25 that Kalshi has not shown its sports event contracts are federally protected swaps, allowing Ohio and Tennessee to enforce state gambling laws against the exchange while the cases continue. The decision affirmed Ohio’s win, vacated Kalshi’s Tennessee injunction, and added another appellate ruling against Kalshi’s sports-contract preemption theory.

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 relief against Ohio and Tennessee sports-gambling regulators. Judge Julia Smith Gibbons wrote for the panel, joined by Judges Eric L. Clay and Rachel S. Bloomekatz.

The court’s September 25 opinion rejected Kalshi’s central argument that its sports event contracts fall inside the Commodity Futures Trading Commission’s exclusive jurisdiction under the Commodity Exchange Act. Kalshi operates a CFTC-registered designated contract market, and it argued that state gambling regulators could not enforce state law against contracts listed on that market. Ohio and Tennessee argued that the contracts were sports wagering products subject to state gambling regimes.

The panel sided with the states on the preliminary-injunction record. It held that Kalshi’s sports event contracts do not meet the CEA’s statutory definition of a “swap” because the underlying sporting events are not intrinsically tied to financial, economic, or commercial consequences in the way interest rates, debt defaults, commodities, securities, or other financial measures are.

The court also gave Ohio and Tennessee a second basis for victory. Even if Kalshi’s sports contracts were treated as swaps for purposes of the analysis, the panel held that the CEA neither expressly nor impliedly preempts Ohio’s and Tennessee’s gambling laws as applied to the contracts.

The result was split by district court but not by state. The Sixth Circuit affirmed the Southern District of Ohio’s denial of Kalshi’s request for a preliminary injunction against the Ohio Casino Control Commission and vacated the Middle District of Tennessee’s injunction that had blocked enforcement by Tennessee officials. Both cases were remanded for further proceedings.

Why did Kalshi lose on the swap question?

The Sixth Circuit accepted one part of Kalshi’s reading but rejected the part that mattered most. The panel agreed that sports outcomes can qualify as “events” under the statutory language. It declined to draw a narrow line between the occurrence of an event and the result of a game.

The harder question was whether those events are “associated with a potential financial, economic, or commercial consequence,” language in the CEA’s swap definition. The panel read that requirement narrowly. It said an event must be inherently connected to a financial consequence in a way that explains why hedging financial risk or deriving price information would be useful.

On that test, sports contracts failed. The court said sports results may create downstream effects for sponsors, broadcasters, franchises, local businesses, or advertisers, but those effects are too attenuated to transform the contracts into swaps. The opinion pointed to examples such as the winner of a tennis match or the number of points scored in a World Cup final, saying those events do not inherently carry financial consequences like a rate increase or a debt default.

The opinion was also skeptical of Kalshi’s information-market framing. Prediction markets can produce probabilities, but the court said the CEA’s swap framework is not triggered merely because a price might reveal what traders believe. At one point, the panel wrote that there was “no conceivable reason” markets need odds on whether a broadcaster says a random word on air.

That reasoning tracks the Ninth Circuit’s August 28 decision against Kalshi in Nevada, KalshiEX LLC v. Assad, No. 25-7516. The Ninth Circuit also held that Kalshi’s sports event contracts were not swaps and that Nevada gambling laws were not preempted at the preliminary-injunction stage.

How does this change the appellate split?

The Sixth Circuit decision leaves Kalshi with one major appellate win and two major appellate losses on the sports-contract preemption issue. The Third Circuit ruled 2-1 for Kalshi in April in KalshiEX LLC v. Flaherty, 172 F.4th 220, affirming preliminary relief against New Jersey gambling regulators. The Ninth Circuit ruled against Kalshi in Nevada on August 28. The Sixth Circuit has now ruled against Kalshi in Ohio and Tennessee.

That split is already in front of the Supreme Court. In Flaherty v. KalshiEX LLC, No. 26-299, New Jersey officials filed a petition for a writ of certiorari on September 2, one day before their extended deadline. The Supreme Court docket lists Mary Jo Flaherty, interim director of the New Jersey Division of Gaming Enforcement, and New Jersey Attorney General Jennifer Davenport as petitioners. The petition was docketed September 8, and the Court granted Kalshi an extension on September 22 to file its response by November 9, 2026.

The Sixth Circuit ruling gives state regulators another appellate opinion to cite in support of Supreme Court review, but it does not by itself send the Ohio and Tennessee cases to the justices. Kalshi could seek rehearing, pursue emergency relief, or later ask the Supreme Court to review the Sixth Circuit decision. The immediate Supreme Court vehicle remains New Jersey’s petition from the Third Circuit judgment.

The Fourth Circuit is another pending front. Kalshi’s Maryland litigation remains separate from the Ohio, Tennessee, Nevada, and New Jersey tracks, and another appellate ruling could further shape how the Supreme Court evaluates the split.

What does the ruling mean for Ohio and Tennessee?

For now, the Sixth Circuit’s decision gives Ohio and Tennessee room to enforce their sports-gambling laws against Kalshi’s sports event contracts while the litigation proceeds. The opinion does not enter a final judgment on all claims after trial. It decides the preliminary-injunction posture, where Kalshi had to show a likelihood of success and that the circumstances justified blocking state enforcement.

That distinction matters, but so does the practical effect. Ohio regulators defeated Kalshi’s request to stop enforcement, and Tennessee regulators won reversal of the injunction that had protected Kalshi there. Unless Kalshi obtains a stay or other relief, the states are no longer blocked by the federal injunction posture addressed in the Sixth Circuit opinion.

The ruling also narrows the path for prediction-market operators trying to characterize sports contracts as federally regulated derivatives rather than state-regulated sports wagering. The panel did not say every event contract falls outside the CEA. It focused on sports event contracts and the statutory link between swaps and financial, economic, or commercial consequences.

The commercial stakes are large. The Block’s September 2 market-volume report said Kalshi recorded $37.17 billion in August volume, down 7.3% from July, while Polymarket and its U.S. platform recorded a combined $8.16 billion. The same report said combined monthly volume across Kalshi, Polymarket, and Polymarket U.S. fell 14.5% to $45.33 billion in August, the first monthly decline since August 2025.

Those figures underscore why the legal question has moved quickly from district courts to multiple appellate courts. If state gambling laws apply, exchanges offering sports contracts face licensing, compliance, and enforcement regimes that differ by state. If Kalshi’s federal-preemption theory ultimately prevails, CFTC registration could become the central legal pathway for sports event contracts nationwide.

What comes next?

The next concrete Supreme Court date is November 9, 2026, the current response deadline in Flaherty v. KalshiEX LLC, No. 26-299. In the lower courts, the Sixth Circuit sent the Ohio and Tennessee cases back for further proceedings after affirming Ohio’s injunction denial and vacating Tennessee’s injunction.

#CFTC #Kalshi #Ohio #Polymarket #Regulation #Sixth Circuit #sports event contracts #Tennessee
Naomi Castellan
Written by
Naomi Castellan

Naomi Castellan covers regulation and legal fights shaping the prediction markets industry for Prediction Express, tracking CFTC rulemaking, Federal Register filings, and the state-versus-federal court battles over event contracts. She has spent nine years reporting on derivatives and commodities regulation.

More by this author →

Sixth Circuit Lets Ohio and Tennessee Enforce Gambling Laws Against Kalshi Sports Contracts

The Sixth Circuit ruled Kalshi's sports event contracts aren't CFTC-exclusive swaps, letting Ohio and Tennessee enforce gambling law, deepening a split with the Third Circuit as Kalshi prices Texas-Tennessee at 64-36.

Naomi Castellan
Naomi Castellan
· 6 min read · 1 reads
Sixth Circuit Lets Ohio and Tennessee Enforce Gambling Laws Against Kalshi Sports Contracts




The Sixth Circuit ruled September 25 that Kalshi’s sports event contracts are not swaps under the Commodity Exchange Act, allowing Ohio and Tennessee to enforce their sports betting laws against the exchange. The unanimous decision in KalshiEX LLC v. Schuler and KalshiEX LLC v. Orgel deepens a federal appellate split over whether sports prediction markets belong primarily under federal commodities law or state gambling law.

What did the Sixth Circuit rule about Kalshi’s sports contracts?

The Sixth Circuit held that Kalshi had not shown its sports event contracts fit the Commodity Exchange Act’s definition of a swap. Writing for the panel, Senior U.S. Circuit Judge Julia Smith Gibbons said an event must be tied to a potential financial, economic, or commercial consequence in a way that is intrinsic enough to explain why hedging or price discovery would be useful. Sports outcomes, the court concluded, do not clear that threshold merely because games can have indirect economic effects.

The opinion, issued in consolidated appeals from Ohio and Tennessee, rejected Kalshi’s core argument that its status as a Commodity Futures Trading Commission-regulated designated contract market shields its sports contracts from state gambling enforcement. The panel said Kalshi’s contracts are conditioned on events, but not events of the kind Congress meant to place within the CEA’s swap framework.

The court’s alternative holding gives the ruling added force. Even assuming the sports contracts were swaps, the panel said the CEA would not expressly or impliedly preempt Ohio’s and Tennessee’s gambling laws. In the court’s view, the state laws regulate sports betting rather than the operation of designated contract markets as such, and any burden on Kalshi follows from its decision to list contracts that resemble sports wagers.

U.S. Circuit Judges Eric Clay and Rachel Bloomekatz joined Gibbons. The cases are KalshiEX LLC v. Matthew Schuler, No. 26-3196, and KalshiEX LLC v. William Orgel, No. 26-5235.

Why does the swap definition matter?

The legal fight turns on jurisdiction. Kalshi argues that sports event contracts traded on its exchange are federally regulated derivatives and that the CFTC’s authority under the CEA displaces state gambling enforcement. Ohio and Tennessee argued that Kalshi is offering sports betting products without complying with state licensing, tax, consumer protection, and responsible-gaming rules.

The Sixth Circuit focused on the CEA’s definition of a swap, including language covering contracts dependent on an event or contingency associated with a potential financial, economic, or commercial consequence. The court said the term cannot be stretched to cover every event that may produce some downstream economic effect. If it could, the panel warned, a wide range of ordinary sports bets could be swept into federal swaps law.

That distinction is central to the prediction-market industry’s sports strategy. If sports contracts are swaps traded on a CFTC-regulated exchange, platforms have a federal argument against state-by-state gambling restrictions. If they are not swaps, state regulators have a much clearer path to treat them like sports wagering.

The CFTC has taken the position in litigation that prediction markets fall within its exclusive jurisdiction in important respects. But the Sixth Circuit’s opinion says courts can still decide whether the product at issue meets the statutory definition that triggers that jurisdiction.

How does this change the circuit split?

The Sixth Circuit now lines up with the Ninth Circuit’s August 28 decision in KalshiEX LLC v. Assad, where the appeals court held that Kalshi had not shown the CEA preempts Nevada gaming regulation as applied to sports event contracts. The Ninth Circuit also concluded that Kalshi’s sports event contracts were not swaps under the CEA.

The Third Circuit went the other way on April 6 in KalshiEX LLC v. Flaherty. That court affirmed a preliminary injunction preventing New Jersey from enforcing state gambling laws against Kalshi’s sports-related event contracts while the litigation proceeds, holding that New Jersey enforcement would conflict with the CEA’s federal framework for designated contract markets.

The result is a direct appellate conflict, but not a final national rule. The Third Circuit decision concerned New Jersey enforcement in a preliminary-injunction posture. The Ninth Circuit decision concerned Nevada. The Sixth Circuit decision concerns Ohio and Tennessee. Other state disputes, including litigation in New York, Massachusetts, Arizona and Minnesota, have moved on separate tracks and may turn on their own records, procedural posture and controlling circuit law.

For Kalshi, the immediate consequence is sharper regulatory pressure in states covered by the Sixth Circuit case. For state gambling regulators, the opinion supplies a second appellate roadmap, after the Ninth Circuit, for resisting the claim that federal commodities law automatically displaces state sports betting regimes.

Why does the Tennessee timing matter?

The ruling landed one day before Texas and Tennessee were scheduled to meet at Neyland Stadium in Knoxville on September 26. Tennessee Athletics said the game was the first regular-season meeting between the programs, with their three prior meetings all taking place in the Cotton Bowl, most recently in 1969. ESPN described the matchup as No. 1 Texas at No. 14 Tennessee, with College GameDay broadcasting from Knoxville before the noon Eastern kickoff.

The game matters here because Tennessee is one of the two states that just won at the Sixth Circuit. The court did not decide the legality of any single market tied to that matchup. It did, however, reject Kalshi’s federal-preemption theory in a case brought by Tennessee officials seeking to preserve the state’s authority over sports wagering.

Tennessee Attorney General Jonathan Skrmetti’s office framed the dispute in a May 26 appellate filing announcement as a fight over whether Kalshi could avoid the Tennessee Sports Gaming Act. The office said licensed operators such as FanDuel, DraftKings and BetMGM operate under Tennessee’s sports wagering law, while Kalshi argued its products were swaps subject only to CFTC oversight.

That state-law contrast is the core business issue. Sportsbooks must obtain state licenses in jurisdictions where they operate. Kalshi’s sports contract model depends on a federal market structure that, if accepted, could let event-contract exchanges reach users in states where conventional online sports betting is limited, taxed differently, or unavailable.

What happens next in the Kalshi cases?

Kalshi can ask the Sixth Circuit for panel rehearing or rehearing en banc. Under Federal Rule of Appellate Procedure 40, a rehearing petition is generally due within 14 days after judgment unless a different rule or order applies, which points to October 9, 2026, from the September 25 judgment. A petition for certiorari at the U.S. Supreme Court is generally due within 90 days after a federal appeals court judgment under Supreme Court Rule 13, unless a timely rehearing petition changes the clock.

Supreme Court review is now easier to frame because the appellate courts have divided on the same basic question. The Third Circuit treated New Jersey enforcement as likely preempted. The Ninth and Sixth Circuits rejected Kalshi’s preemption theory in cases brought by Nevada, Ohio and Tennessee regulators.

The next concrete milestone is the rehearing window in the Sixth Circuit. If Kalshi bypasses or loses rehearing, the national question moves closer to the Supreme Court: whether sports event contracts listed on a CFTC-regulated exchange are federally protected derivatives, state-regulated sports wagers, or products Congress must address more directly.

#CFTC #College Football #Jonathan Skrmetti #Kalshi #Ohio #Regulation #Sixth Circuit #Tennessee
Naomi Castellan
Written by
Naomi Castellan

Naomi Castellan covers regulation and legal fights shaping the prediction markets industry for Prediction Express, tracking CFTC rulemaking, Federal Register filings, and the state-versus-federal court battles over event contracts. She has spent nine years reporting on derivatives and commodities regulation.

More by this author →