The Sixth Circuit ruled on September 25 that Kalshi’s sports-event contracts are not federally regulated swaps, allowing Ohio and Tennessee gambling regulators to enforce state law against the exchange. The panel affirmed an Ohio ruling against Kalshi and vacated a Tennessee injunction that had blocked state enforcement.
What did the Sixth Circuit actually rule?
The U.S. Court of Appeals for the Sixth Circuit held that Kalshi had not shown its sports-event contracts fit the Commodity Exchange Act’s definition of a swap, according to the court’s published opinion in KalshiEX LLC v. Schuler and KalshiEX LLC v. Orgel. Judge Julia Smith Gibbons wrote for a three-judge panel that also included Judges Eric L. Clay and Rachel S. Bloomekatz.
The decision gives Ohio and Tennessee the appellate ruling they sought: Kalshi cannot use its CFTC-regulated exchange status, at least in the Sixth Circuit, to block those states from applying sports-gambling laws to the company’s sports contracts. The panel affirmed U.S. District Judge Sarah Daggett Morrison’s March 2026 denial of Kalshi’s preliminary injunction request in Ohio and vacated U.S. District Judge Aleta A. Trauger’s February 2026 injunction in Tennessee.
The court rejected Kalshi’s two core theories. First, it held that the contracts did not satisfy the statutory swap definition. Second, it held that even if the contracts were swaps, the Commodity Exchange Act did not expressly or impliedly preempt Ohio’s and Tennessee’s gambling statutes. That combination leaves Kalshi without either the product-classification argument or the preemption fallback in the Sixth Circuit.
The opinion was especially skeptical of Kalshi’s argument that sports outcomes are tied to the kind of economic or commercial consequences Congress meant to capture in the swap definition. The panel said there was no “conceivable reason” markets would need to price whether a broadcaster uses a random word on air, and it described downstream effects on sponsors, media companies and related businesses as too attenuated to carry Kalshi’s theory.
How did the Ohio and Tennessee cases begin?
Kalshi began listing sports-event contracts in January 2025. Ohio’s Casino Control Commission and Tennessee’s Sports Wagering Council later told the company to stop offering the products in their states, arguing the contracts amounted to unlicensed sports wagering under state law.
Kalshi sued both sets of regulators. In Ohio, the company sued Ohio Casino Control Commission Executive Director Matthew Schuler and other officials, arguing that state enforcement was preempted because the contracts traded on a federally regulated designated contract market. Judge Morrison denied Kalshi’s request for a preliminary injunction in March 2026, according to the Southern District of Ohio order in KalshiEX LLC v. Schuler.
In Tennessee, Kalshi sued Tennessee Sports Wagering Council Chairman William Orgel, Executive Director Mary Beth Thomas and Tennessee Attorney General Jonathan Skrmetti. Judge Trauger granted Kalshi a preliminary injunction in February 2026, finding that the company was likely to succeed on its preemption argument, according to the Middle District of Tennessee order in KalshiEX LLC v. Orgel.
The Sixth Circuit consolidated the appeals and put the two states on the same footing. Ohio’s win in district court stands, while Tennessee’s injunction is vacated and the case returns to the lower court for further proceedings.
Does the ruling deepen the circuit split?
Yes. The Sixth Circuit now joins the Ninth Circuit in rejecting Kalshi’s argument that sports-event contracts are swaps insulated from state gambling enforcement. The Third Circuit reached the opposite result in April in a New Jersey case, creating a direct split over the Commodity Exchange Act and state gambling laws.
In KalshiEX LLC v. Flaherty, the Third Circuit held on April 6 that Kalshi was likely to succeed on its claim that its sports-related event contracts are swaps and that New Jersey’s enforcement effort was preempted. Judge David J. Porter wrote the opinion for a panel that included Chief Judge Michael A. Chagares and Judge Jane R. Roth. Judge Roth dissented.
The Ninth Circuit went the other way on August 28 in KalshiEX LLC v. Assad, a Nevada dispute involving state gaming regulators. That panel held that Kalshi’s sports-event contracts were not swaps under the Commodity Exchange Act and that Nevada could pursue its gambling-law arguments. The Ninth Circuit also said CFTC regulations currently prohibit designated contract markets from listing contracts involving gaming.
On September 16, the Ninth Circuit issued a separate tribal-gaming decision in Blue Lake Rancheria v. Kalshi Inc.. The court held that Blue Lake Rancheria and the Chicken Ranch Rancheria of Me-Wuk Indians were likely to succeed on their claim that Kalshi’s sports contracts on Indian lands violated the Indian Gaming Regulatory Act. That ruling turned on IGRA rather than the Commodity Exchange Act, but it added another appellate decision rejecting Kalshi’s attempt to keep sports contracts outside gambling-law frameworks.
Why does the swap definition matter?
The swap question is the hinge of Kalshi’s legal position. Kalshi argues that its contracts are derivatives traded on a CFTC-regulated designated contract market, meaning federal commodities law governs trading and states cannot impose their own gambling-law regimes on the same products. State regulators argue that sports-event contracts function like sports betting and should be subject to state licensing, tax, consumer-protection and age-restriction rules.
The practical difference is not small. Ohio and Tennessee sports-betting rules apply to licensed sportsbook operators and generally restrict wagering to people 21 and older. Kalshi has allowed exchange accounts for users 18 and older. State regulators have treated that gap as part of the reason federal exchange status cannot be used to bypass sports-wagering regimes.
The Sixth Circuit’s opinion narrows the question to statutory text and preemption. The panel read the Commodity Exchange Act’s swap definition in context, rather than treating the word “event” as broad enough to include any contest result with some downstream commercial effect. It also declined to treat CFTC oversight of designated contract markets as a command that states must stand down whenever a listed product resembles gambling under state law.
What is before the Supreme Court now?
New Jersey has asked the Supreme Court to review the Third Circuit’s pro-Kalshi ruling. The Supreme Court docket in Flaherty v. KalshiEX LLC, No. 26-299, shows that Mary Jo Flaherty, interim director of the New Jersey Division of Gaming Enforcement, and other petitioners filed a petition for a writ of certiorari on September 2, 2026. The petition was docketed on September 8.
The same docket shows that Kalshi’s response deadline, originally October 8, was extended on September 22 to November 9, 2026. It also lists a September 22 amicus brief from the National Council of Legislators from Gaming States.
The question presented by the New Jersey petition is moving against a different appellate backdrop than when the Third Circuit decision was issued in April. The Third Circuit has one answer on the Commodity Exchange Act, while the Ninth and Sixth Circuits have another. A Fourth Circuit appeal involving Maryland remains part of the broader litigation landscape, with Maryland regulators also contesting Kalshi’s attempt to block state enforcement over sports-event contracts.
For now, the operative result is jurisdiction-specific. In Ohio and Tennessee, the Sixth Circuit’s ruling allows state regulators to enforce their gambling laws against Kalshi’s sports-event contracts unless further appellate relief changes that posture. In New Jersey, the Third Circuit’s preliminary-injunction ruling remains the key appellate decision. In Nevada, the Ninth Circuit has allowed state gambling-law arguments to proceed.
The next dated step is Kalshi’s Supreme Court response, due November 9, 2026, in Flaherty v. KalshiEX LLC, No. 26-299. If the Court takes the case, it would have a vehicle to address whether sports-event contracts listed on a CFTC-regulated exchange displace state gambling enforcement.
