Meta description: Sixth Circuit ruled Kalshi sports contracts are not swaps, letting Ohio and Tennessee pursue gambling-law enforcement.
Tags: Kalshi, CFTC, Ohio Casino Control Commission, Tennessee Sports Wagering Council, Sixth Circuit, Sports Betting
Market platform: Kalshi
Category: Regulation
The U.S. Court of Appeals for the Sixth Circuit ruled against Kalshi on September 25, holding that the exchange has not shown its sports event contracts are swaps under the Commodity Exchange Act. The decision lets Ohio and Tennessee continue enforcing state sports gambling laws while a conflicting Third Circuit ruling remains before the Supreme Court.
What did the Sixth Circuit decide?
Judge Julia Smith Gibbons, joined by Judges Eric L. Clay and Rachel S. Bloomekatz, affirmed an Ohio federal court’s denial of Kalshi’s request for a preliminary injunction and vacated a Tennessee federal court’s injunction in Kalshi’s favor. The consolidated opinion in KalshiEX LLC v. Schuler and KalshiEX LLC v. Orgel remands both cases for further proceedings.
The ruling does not end the underlying litigation. It decides the preliminary-injunction posture, including whether Kalshi had shown a likelihood of success on its argument that federal commodities law preempts Ohio and Tennessee gambling enforcement. The panel said Kalshi had not made that showing.
The core holding turns on the Commodity Exchange Act’s treatment of swaps. Kalshi argued that its sports event contracts fall within the CFTC’s exclusive federal jurisdiction because they are swaps traded on a designated contract market. The Sixth Circuit rejected that threshold argument, holding that the contracts do not depend on events with the kind of financial, economic, or commercial consequence required by the statute.
Why did the court say sports contracts are not swaps?
The Sixth Circuit accepted that Kalshi’s contracts depend on events, including sports outcomes. But it said that was not enough. Under the panel’s reading, the relevant event must be intrinsically tied to a financial consequence in a way that explains why hedging risk or generating price information would be useful, such as with interest rates or stock prices.
Gibbons wrote that Kalshi’s sports contracts have, at most, downstream economic consequences. The opinion contrasted financial benchmarks with sports questions, including contracts tied to teams advancing in the NCAA basketball tournaments, the winner of the U.S. Open golf championship, soccer corner kicks, broadcast words and parlay-style combinations of player and team events.
The panel also rejected Kalshi’s broader preemption argument. Even if the contracts were treated as swaps for purposes of the analysis, the court held that the Commodity Exchange Act does not expressly or impliedly wipe out Ohio’s and Tennessee’s sports gambling laws as applied to Kalshi’s sports event contracts.
How did Ohio and Tennessee reach the Sixth Circuit?
Kalshi began self-certifying and listing sports event contracts in January 2025, according to the Sixth Circuit opinion. The Ohio Casino Control Commission sent Kalshi a cease-and-desist letter dated March 31, 2025, saying the company was offering sporting event contracts to Ohio users without a state sports gaming license.
Ohio later opposed Kalshi’s request for a preliminary injunction in the Southern District of Ohio. Judge Sarah Daggett Morrison denied that request, finding Kalshi had not made the showing needed for extraordinary preliminary relief. The Sixth Circuit affirmed that denial.
Tennessee’s Sports Wagering Council sent Kalshi a cease-and-desist letter in early 2026 demanding that it stop offering sports event contracts to customers in Tennessee. Kalshi sued Tennessee officials in the Middle District of Tennessee, where Judge Aleta Arthur Trauger granted preliminary relief in part. The Sixth Circuit vacated that injunction, meaning Tennessee officials are no longer blocked by that order while the case continues.
How does this deepen the circuit split?
The Sixth Circuit is now aligned in result with the Ninth Circuit, which ruled against Kalshi in a Nevada dispute on August 28, 2026, in KalshiEX LLC v. Assad. The Ninth Circuit affirmed a Nevada order dissolving Kalshi’s preliminary injunction and rejected Kalshi’s attempt to use federal commodities law to block state gambling enforcement.
The Third Circuit went the other way in April 2026. In KalshiEX LLC v. Flaherty, a divided panel affirmed a New Jersey injunction in Kalshi’s favor, holding that federal law likely preempts New Jersey’s gambling-law enforcement against the exchange’s sports event contracts.
That split is already in front of the U.S. Supreme Court. New Jersey Attorney General Jennifer Davenport and state gaming officials filed a petition for certiorari in September asking the justices to review the Third Circuit decision, according to the Supreme Court docket in Flaherty v. KalshiEX LLC. The Court has not announced whether it will take the case.
What is Kalshi’s argument now?
Kalshi has framed the appellate disagreement as proof that a state-by-state regime is incompatible with a national exchange. Company spokesperson Dani Lever said after the Sixth Circuit ruling that Kalshi disagreed with the decision and that courts are divided on whether federal law covers the contracts.
“Markets can’t operate when the rules change at every state line, which is why Congress created a single federal regulator with nationwide rules,” Lever said, according to Courthouse News Service.
The Sixth Circuit was not persuaded by that framing. The court said Ohio and Tennessee regulate sports betting, not the operation of designated contract markets as such, and that any burden on Kalshi results from its decision to offer contracts the states treat as sports wagering. The panel also pointed to federal law’s history of leaving gambling policy largely to the states.
What are the stakes for prediction markets?
The ruling leaves Kalshi with two appellate losses and one appellate win on the central preemption question. The Fourth Circuit still has a Maryland appeal pending, according to the Sixth Circuit opinion, adding another possible vehicle for appellate review if the Supreme Court does not act first on New Jersey’s petition.
The commercial stakes are large. The Block reported that Kalshi recorded about $37.2 billion in August 2026 trading volume, down 7.3% from July, while combined monthly volume across Kalshi, Polymarket and Polymarket US was $45.3 billion. More than a dozen states have taken enforcement action or filed lawsuits against Kalshi over sports contracts, according to The Block’s September 26 report on the Sixth Circuit decision.
The next concrete milestone is the Supreme Court’s response to New Jersey’s certiorari petition in Flaherty. If the justices grant review, the Court could decide whether sports event contracts listed on CFTC-regulated exchanges can be shielded from state gambling laws. If review is denied, Kalshi, state regulators and the CFTC will continue litigating under a map where the Third Circuit points one way and the Sixth and Ninth Circuits point the other.
