Meta description: Sixth Circuit says Kalshi has not shown sports contracts are federally preempted swaps, aligning with the Ninth Circuit.
Tags: Kalshi, CFTC, Ohio, Tennessee, New Jersey, Polymarket, Supreme Court
Market platform: Kalshi
Category: Regulation
The Sixth Circuit ruled on September 25 that Kalshi has not shown its sports event contracts qualify as swaps subject exclusively to federal regulation, allowing Ohio and Tennessee to enforce state gambling laws against the exchange while the broader preemption fight moves toward the Supreme Court.
The unanimous panel, Judges Julia Smith Gibbons, Eric Clay, and Rachel Bloomekatz, affirmed a Southern District of Ohio order denying Kalshi’s request for a preliminary injunction. It also vacated a Middle District of Tennessee order that had blocked Tennessee from enforcing its gambling statute against the company.
Kalshi argued that contracts listed on its CFTC-registered Designated Contract Market are governed by the Commodity Exchange Act and Dodd-Frank Act, which it says preempt state efforts to regulate those contracts as sports bets. The Sixth Circuit disagreed at the preliminary-injunction stage, holding that Kalshi had not carried its burden to show that its sports event contracts fall within the federal swaps framework in a way that would bar Ohio and Tennessee enforcement.
Which appellate courts have ruled on Kalshi’s sports contracts?
Three federal appeals courts have now weighed in, but the divide has two sides. The Third Circuit sided with Kalshi in April 2026 in a New Jersey dispute. The Ninth Circuit sided against Kalshi in August in Nevada, and the Sixth Circuit has now aligned with that position in the Ohio and Tennessee cases.
In the Ninth Circuit’s August 28 decision, the court affirmed a district court order dissolving Kalshi’s injunction against the Nevada Gaming Control Board. Writing for the panel, Judge Ryan D. Nelson said, “the substance of the sports event contracts offered on Kalshi’s DCM is sports gambling, regardless of whether Kalshi calls them swaps.”
The Third Circuit reached the opposite result in KalshiEX LLC v. Flaherty. In that April 2026 decision, a 2-1 panel held that federal law preempts New Jersey’s sports-gambling rules as applied to Kalshi’s contracts because the contracts function as swaps under exclusive CFTC jurisdiction.
New Jersey has asked the Supreme Court to review that ruling. In a September 2 petition for a writ of certiorari, New Jersey Attorney General Jennifer Davenport and Division of Gaming Enforcement interim director Mary Jo Flaherty told the justices that the appellate decisions had produced “a direct, acknowledged, and irreconcilable split between the Third and Ninth Circuits.”
The question before the Court, if it grants review, is whether Dodd-Frank displaced state authority over sports wagers when those wagers are structured as event contracts on a CFTC-registered exchange. The answer will determine whether sports event contracts are treated primarily as a federal derivatives product or remain exposed to state-by-state gambling enforcement.
What did the Sixth Circuit decision change for Ohio and Tennessee?
The Sixth Circuit decision gives Ohio and Tennessee room to proceed under state gambling law while the litigation continues. That does not end Kalshi’s federal preemption argument, but it denies the exchange the immediate shield it sought against enforcement in those states.
The Ohio portion of the ruling leaves in place the Southern District of Ohio’s denial of a preliminary injunction. The Tennessee portion removes the injunction Kalshi had obtained in the Middle District of Tennessee. In practical terms, the ruling shifts leverage back to state regulators in both states unless Kalshi obtains further relief from the Supreme Court or later wins on the merits.
The opinion also matters because it reduces Kalshi’s ability to frame the appellate map as a one-off Nevada loss against a New Jersey win. With the Sixth Circuit now aligned with the Ninth Circuit, state gambling regulators have two appellate rulings supporting their position that federal commodities law does not automatically block state enforcement against sports event contracts.
Is New York’s Polymarket lawsuit part of the same regulatory fight?
New York’s case against Polymarket is part of the same broader fight over state gambling authority, but it involves a different platform and a different procedural posture. On September 24, New York Attorney General Letitia James and Governor Kathy Hochul announced a lawsuit against QCX LLC, which does business as Polymarket US, alleging that the exchange is operating an illegal gambling business without a New York license.
The New York complaint seeks to bar Polymarket from operating in the state and asks for restitution, forfeiture of alleged illegal gains, and civil penalties. The state is not challenging Kalshi in that case. It is targeting Polymarket’s New York-facing activity and arguing that state gambling law applies even where a prediction-market operator points to federal commodities oversight.
Polymarket responded quickly. After the state filing, QCX moved to shift the case from Manhattan state court to the U.S. District Court for the Southern District of New York and filed its own federal suit against James and New York State Gaming Commission officials. In that action, Polymarket argues that New York is exceeding its authority over a federally regulated exchange.
The New York litigation therefore adds another jurisdiction to the sports-contract fight, but it does not line up perfectly with the Kalshi cases. Kalshi’s disputes in Ohio, Tennessee, Nevada, and New Jersey turn heavily on whether its listed sports event contracts are swaps insulated from state gambling rules. New York’s Polymarket case centers on whether the state can enforce its gambling laws against a platform it says lacks a state gambling license.
What does the CFTC’s mention-markets advisory add?
The CFTC is also sharpening its scrutiny of prediction-market products outside the sports-gambling cases. On September 22, the agency’s Division of Market Oversight issued a staff advisory on so-called mention markets, contracts that settle based on whether a public figure says a specific word or phrase during an appearance.
The advisory said those contracts present a heightened risk of manipulation under Core Principle 3 of the Commodity Exchange Act. It did not ban mention markets, but it said there are limited circumstances in which an exchange could list them consistent with the Act and CFTC regulations. That language puts exchanges on notice that staff will expect stronger safeguards before such products move through the Part 40 self-certification process.
The advisory followed a CFTC enforcement action involving Gabriel Perez, a former White House teleprompter operator. The CFTC said Perez used advance knowledge of President Donald Trump’s speeches to trade on contracts tied to whether specific phrases would be mentioned. The agency barred him from trading on prediction markets for three years.
That enforcement action illustrates a separate but related pressure point for the industry. Even where a product is treated as a federally regulated event contract, the CFTC can still police market integrity, manipulation risk, and exchange controls. State gambling cases ask who has authority over sports betting-like products. The mention-markets advisory asks whether some contracts are too easy to manipulate even within the federal commodities framework.
What happens next?
The next major milestone is the Supreme Court’s handling of New Jersey’s petition. If the justices grant review, they could resolve whether CFTC-regulated sports event contracts preempt state gambling laws. If they deny review, the split between the Third Circuit on one side and the Ninth and Sixth Circuits on the other will continue to shape where and how Kalshi can offer sports markets.
Kalshi now faces state enforcement risk in Ohio, Tennessee, and Nevada, while the Third Circuit’s New Jersey ruling remains the company’s strongest appellate support. Polymarket’s New York case will proceed on a separate track, with its removal fight and federal suit likely to determine whether that dispute begins in state court or federal court.
For prediction-market operators, the immediate result is a more fragmented legal map. Sports event contracts have federal protection in New Jersey under the Third Circuit’s ruling, but the latest appellate decisions leave state gambling regulators with room to act in Nevada, Ohio, and Tennessee. The Supreme Court petition is now the clearest path to a national answer.
