Meta description: The Sixth Circuit rejected Kalshi’s sports-contract preemption argument in Ohio and Tennessee, widening the appellate split.
Tags: Kalshi, CFTC, Sixth Circuit, Third Circuit, Ninth Circuit, sports contracts
Market platform: Kalshi
Category: Regulation
The U.S. Court of Appeals for the Sixth Circuit ruled on September 25, 2026, that Kalshi’s sports event contracts do not qualify as swaps under the Commodity Exchange Act, allowing Ohio and Tennessee to continue enforcing state gambling laws against the exchange while the fight over federally regulated event contracts moves closer to the Supreme Court.
The unanimous three-judge panel, in an opinion by Judge Julia Smith Gibbons, affirmed a March 2026 order by Chief Judge Sarah D. Morrison denying Kalshi a preliminary injunction in Ohio. It also vacated a February 2026 preliminary injunction that Judge Aleta A. Trauger had granted Kalshi in Tennessee.
The decision gives state gaming officials in Ohio and Tennessee a major appellate win, but it does not end the broader dispute. The Third Circuit has taken a more favorable view of Kalshi’s arguments in a New Jersey case, while the Ninth Circuit sided with Nevada in August. New Jersey filed a Supreme Court petition on September 2, 2026, making that case the clearest near-term vehicle for a national ruling.
What did the Sixth Circuit decide about Kalshi’s sports contracts?
The Sixth Circuit held that Kalshi’s sports event contracts do not fit the CEA’s definition of a swap because the outcome of a game, standing alone, does not create the kind of direct financial or economic consequence the statute requires. The panel distinguished sports outcomes from events such as interest-rate movements, currency changes, debt defaults, or other occurrences with built-in financial effects.
Kalshi argued that sports outcomes can affect ticket sales, advertising, sponsorships, merchandise, and other commercial activity. The Sixth Circuit rejected that theory as too indirect for swap status, writing that any financial effects from a particular game result were too attenuated to bring the contracts within the CEA’s swap definition.
That holding matters because Kalshi’s strongest state-law defense has depended on federal commodities law. Kalshi has argued that contracts listed on a CFTC-regulated designated contract market fall under federal oversight and cannot be policed through state gambling-law regimes. Ohio and Tennessee argued that sports contracts listed by Kalshi function as sports wagering and can be restricted under state gaming laws.
The Sixth Circuit did not limit its ruling to the swap-definition issue. It also addressed Kalshi’s broader preemption theory and held that, even if the contracts were swaps, the CEA would not expressly or impliedly preempt Ohio’s or Tennessee’s gambling statutes. That alternative holding makes the ruling more difficult for Kalshi to narrow on further appeal.
How did the ruling affect the Ohio and Tennessee cases?
In Ohio, the Sixth Circuit affirmed the district court’s denial of preliminary relief to Kalshi. That leaves Ohio regulators free, at least at this stage of the case, to enforce state gambling laws against the exchange’s sports contracts.
In Tennessee, the panel vacated the preliminary injunction Kalshi had obtained earlier in 2026. The practical result is that Tennessee’s enforcement position is no longer blocked by that injunction while the litigation continues.
The ruling came in consolidated Sixth Circuit appeals from Ohio and Tennessee: KalshiEX LLC v. Schuler, No. 26-3196, and KalshiEX LLC v. Orgel, No. 26-5235. The CFTC filed an amicus brief in the Sixth Circuit on May 12, 2026, according to CFTC Press Release No. 9230-26 and the Justia docket, arguing for exclusive CFTC jurisdiction and preemption. The Sixth Circuit nevertheless sided with the states on both the swap-definition issue and preemption.
How does this compare with the Third and Ninth Circuits?
The Sixth Circuit’s ruling deepens a split with the Third Circuit, which in April 2026 affirmed preliminary relief for Kalshi in its New Jersey case. The Third Circuit did not issue a final merits judgment for Kalshi, but it found Kalshi likely to succeed on its argument that the CEA preempts New Jersey’s enforcement of gambling laws against sports contracts listed on a CFTC-regulated exchange.
That Third Circuit framing gave Kalshi its strongest appellate support so far. The panel read the CEA’s swap definition more broadly than the Sixth Circuit did and treated federal commodities regulation as a likely barrier to New Jersey’s enforcement effort at the preliminary-injunction stage.
The Ninth Circuit then went the other direction. On August 28, 2026, a unanimous three-judge panel affirmed an order dissolving Kalshi’s preliminary injunction against the Nevada Gaming Control Board, which had sent the exchange a cease-and-desist letter over alleged unlicensed sports-book activity. Like the Sixth Circuit, the Ninth Circuit found that Kalshi’s sports contracts did not meet the CEA’s swap definition.
The result is a three-circuit landscape: the Third Circuit has sided with Kalshi at the preliminary-injunction stage, while the Ninth and Sixth Circuits have rejected key parts of Kalshi’s federal-preemption theory. A separate Kalshi appeal involving Maryland remains pending in the Fourth Circuit.
What is Kalshi’s position after the Sixth Circuit ruling?
Kalshi has argued across the state cases that it operates through a federally regulated derivatives exchange and that CFTC oversight displaces state gambling-law enforcement for listed contracts. After the Sixth Circuit ruling, Kalshi spokesperson Dani Lever criticized the panel’s reasoning, saying that the law does not require a swap to involve intrinsic financial consequences.
The company’s position drew support from the CFTC in the Sixth Circuit, but state regulators have continued to argue that federal commodities registration does not give an exchange a license to offer sports betting products without state approval. The Sixth Circuit adopted the states’ view that Ohio and Tennessee can enforce their gambling laws even against contracts listed on a CFTC-regulated market.
The opinion also narrows the practical value of CFTC support for Kalshi in state-by-state litigation. A federal regulator’s view of its own jurisdiction can matter, but the Sixth Circuit’s ruling shows that appellate courts may still read the CEA more narrowly than Kalshi and the commission do when sports outcomes are the underlying event.
Why does this matter beyond Kalshi?
The Sixth Circuit decision lands as other prediction-market operators face similar state challenges. In New York, Attorney General Letitia James and Governor Kathy Hochul announced a September 24, 2026 lawsuit against QCX LLC, doing business as Polymarket US, alleging that the platform operated an unlicensed gambling business through the New York State Gaming Commission’s licensing regime and allowed users as young as 18 to trade contracts, below the state’s 21-and-over threshold for mobile wagering.
The New York Attorney General’s office said the lawsuit seeks forfeiture of illegal gains, consumer restitution, and fines equal to three times the gains made through the alleged illegal actions. Polymarket has responded with federal litigation of its own, arguing that New York’s enforcement theory is barred because the platform operates through a federally regulated derivatives framework.
That fight is not identical to Kalshi’s sports-contract litigation, but it raises the same industry question: where federal derivatives regulation ends and state gambling law begins. The answer will shape how exchanges list sports, politics, culture, and other event contracts in states that view those markets as wagering products.
What is the next milestone?
The next national marker is New Jersey’s Supreme Court petition, filed September 2, 2026, seeking review of the Third Circuit’s preliminary-injunction ruling. If the Court grants certiorari, it could decide whether CFTC-regulated sports event contracts preempt state gambling enforcement. If it denies review, the split between the Third Circuit on one side and the Ninth and Sixth Circuits on the other will remain the central legal map for Kalshi and state regulators.
The Fourth Circuit’s pending Maryland appeal is the other case to watch. A ruling there would add another appellate view before or during Supreme Court consideration, and could affect how quickly exchanges, state regulators, and the CFTC press for a single national rule.
