Meta description: Sixth Circuit says Kalshi sports contracts are not swaps, letting Tennessee and Ohio enforce gambling laws as Supreme Court review looms.
Tags: Kalshi, CFTC, Tennessee Sports Wagering Council, Ohio Casino Control Commission, Sixth Circuit, Supreme Court
Market platform: Kalshi
Category: Regulation
Tennessee and Ohio can enforce state gambling laws against Kalshi’s sports-event contracts after the U.S. Court of Appeals for the Sixth Circuit ruled on Sept. 25 that the contracts are not swaps under the Commodity Exchange Act. The unanimous panel vacated Kalshi’s Tennessee injunction, affirmed Ohio’s win, and deepened the appellate split already moving toward the Supreme Court.
The ruling is limited to sports-event contracts. It does not decide the status of Kalshi’s non-sports markets in Tennessee or Ohio. But for sports, the Sixth Circuit’s opinion in KalshiEX LLC v. Schuler and KalshiEX LLC v. Orgel gives state gambling regulators a second federal appellate victory after the Ninth Circuit sided with Nevada in August.
What did the Sixth Circuit decide in the Kalshi sports-contract cases?
The Sixth Circuit consolidated two preliminary-injunction appeals: Kalshi’s appeal from an Ohio order denying relief, and Tennessee officials’ appeal from a Tennessee order blocking enforcement. Senior Circuit Judge Julia Smith Gibbons wrote for a panel that also included Judges Eric L. Clay and Rachel S. Bloomekatz.
The court reached two holdings. First, it held that Kalshi had not shown its sports-event contracts qualify as swaps under the CEA, the federal commodities statute that gives the Commodity Futures Trading Commission exclusive jurisdiction over swaps. Second, it held that even if the contracts were swaps, the CEA does not expressly or impliedly preempt Ohio’s or Tennessee’s gambling laws.
The practical result is different in each state because the cases arrived in different procedural postures. In Ohio, the Sixth Circuit affirmed the Southern District of Ohio’s denial of Kalshi’s motion for a preliminary injunction. In Tennessee, it vacated the Middle District of Tennessee’s preliminary injunction and sent the case back for further proceedings under the appellate court’s reading of federal law.
Why did the court say Kalshi’s sports contracts are not swaps?
The panel focused on the statutory definition of a swap, including whether the contract is tied to a potential financial or economic consequence. Kalshi argued that sports outcomes can affect broadcasters, sponsors, advertisers, teams, and surrounding communities. The Sixth Circuit found that link too indirect to bring the contracts within the federal swaps regime.
In the court’s words, Kalshi’s sports-event contracts have only “downstream economic consequences,” if they have economic consequences at all. The opinion also pointed to contracts based on events such as what a broadcaster might say during a game, writing that there was no market need to know the probability that a broadcaster would say a random word on air.
The panel contrasted sports contracts with instruments used to manage financial risk. It cited Kalshi’s own prior statement that sports contracts have “no inherent economic significance” and used that concession against the exchange’s argument that its sports markets function like traditional federally regulated swaps.
How did the Tennessee dispute reach the Sixth Circuit?
The Tennessee Sports Wagering Council sent Kalshi a cease-and-desist letter in early 2026 demanding that the exchange stop offering sports-event contracts to Tennessee customers. Kalshi sued in federal court in Nashville, arguing that its federally regulated designated contract market could not be subjected to state sports-wagering rules.
On Feb. 19, U.S. District Judge Aleta A. Trauger granted Kalshi a preliminary injunction. Her order found that Kalshi was likely to succeed on its argument that the CEA preempted Tennessee’s attempt to regulate the contracts. The injunction barred state-official defendants from enforcing Tennessee gambling laws against Kalshi’s sports-event contracts while the case proceeded.
The Sixth Circuit’s Sept. 25 opinion wipes out that injunction. The case now returns to Judge Trauger’s court, but with the appellate panel having rejected the legal premise that drove the preliminary relief.
What happened in Ohio?
Ohio took a different path. The Ohio Casino Control Commission sent Kalshi a cease-and-desist letter after the exchange offered sports-event contracts to Ohio residents without a state sports-gaming license. Kalshi sought a preliminary injunction in the Southern District of Ohio, but Chief Judge Sarah D. Morrison denied it.
The Sixth Circuit affirmed that denial. That means Ohio regulators were not newly freed from an injunction, because no injunction had been entered. Instead, the appellate ruling leaves Ohio’s enforcement position intact and gives the state a precedential decision on both the swap-definition question and CEA preemption.
What are Tennessee officials and Kalshi saying?
Tennessee Attorney General Jonathan Skrmetti called the ruling a “great win” for the state and said Kalshi had attempted to avoid Tennessee’s sports-gambling rules and taxes. His office had argued in the Sixth Circuit that Dodd-Frank’s swap provisions were designed for financial instruments used to hedge economic risk, not for sports wagering.
Kalshi said it expects the decision to be overturned. Company spokesperson Dani Lever told The Block that the law does not require a swap to involve intrinsic financial consequences and argued that sports plainly carry financial effects. She also repeated Kalshi’s core federal-uniformity argument, saying markets cannot operate when rules change at every state line.
The stakes are material for Kalshi’s growth strategy. The Block reported that Kalshi recorded $38.67 billion in trading volume in August 2026, with sports contracts helping drive the exchange’s recent expansion. The Sixth Circuit ruling threatens that strategy in Ohio and Tennessee unless Kalshi wins further review or changes how it offers sports markets in those states.
Where does the circuit split stand now?
Three federal appeals courts have now ruled on state enforcement against Kalshi sports contracts, and they do not agree. The Third Circuit sided with Kalshi in April in litigation against New Jersey regulators. The Ninth Circuit ruled against Kalshi on Aug. 28 in the Nevada case. The Sixth Circuit followed on Sept. 25 with a ruling against Kalshi in the Ohio and Tennessee cases.
A Fourth Circuit appeal involving Maryland remains pending. The split is already before the Supreme Court because New Jersey, after losing in the Third Circuit, filed a Sept. 2 petition asking the justices to review the issue. New Jersey argues that Congress did not silently make sports betting immune from state gambling law by placing swaps under federal commodities regulation.
The Sixth Circuit opinion strengthens the case for Supreme Court review by creating another appellate ruling directly at odds with the Third Circuit’s approach. It also gives state regulators a broader roadmap: challenge both the premise that sports-event contracts are swaps and the claim that federal commodities law displaces state gambling statutes.
What happens next for Kalshi in Tennessee and Ohio?
With the Tennessee injunction vacated, state officials are no longer barred by that order from enforcing Tennessee gambling law against Kalshi’s sports-event contracts. In Ohio, the denial of preliminary relief remains in place, leaving the Ohio Casino Control Commission’s enforcement posture undisturbed.
Kalshi can ask the full Sixth Circuit to rehear the consolidated cases, seek Supreme Court review, or adjust its sports offerings in Ohio and Tennessee while litigation continues. The next concrete milestone is the Supreme Court’s response to New Jersey’s Sept. 2 petition, which could determine whether the justices take up the sports-contract preemption fight this term.
