Meta description: Sixth Circuit says Kalshi sports contracts do not preempt Ohio and Tennessee gambling laws, deepening a federal appellate split.
Tags: Kalshi, CFTC, Ohio Casino Control Commission, Tennessee Sports Wagering Council, Sixth Circuit, sports contracts
Market platform: Kalshi
Category: Regulation
The U.S. Court of Appeals for the Sixth Circuit ruled that Kalshi has not shown its sports-event contracts qualify as swaps under the Commodity Exchange Act, giving Ohio and Tennessee regulators a major win in their fight to treat the contracts as gambling products subject to state law.
What did the Sixth Circuit decide?
The Sixth Circuit held Friday that Kalshi’s sports-event contracts did not meet the Commodity Exchange Act’s definition of a federally regulated swap, according to the court’s opinion authored by Judge Julia Smith Gibbons. The panel also concluded that, even if the contracts were swaps, the federal statute would not preempt Ohio’s and Tennessee’s gambling laws.
That second holding is central to the ruling. Kalshi has argued that its status as a Commodity Futures Trading Commission-registered designated contract market places its event contracts under exclusive federal oversight, blocking state gambling regulators from enforcing local licensing laws. The Sixth Circuit rejected that preemption theory for Ohio and Tennessee, putting two state enforcement actions back on firmer legal ground.
The dispute reached the appellate court after the Ohio Casino Control Commission ordered Kalshi to stop offering sports contracts without a state gaming license, and the Tennessee Sports Wagering Council issued a cease-and-desist order. Kalshi sued to block enforcement in both states, arguing that federal commodities law displaced state gambling regulation for contracts listed on a CFTC-regulated exchange.
The Sixth Circuit affirmed the denial of Kalshi’s requested injunction against Ohio regulators. For Tennessee, it vacated an injunction that had blocked the state from enforcing its order, a narrower procedural distinction that still leaves Tennessee regulators in a stronger position after the ruling.
Why did the court say the contracts are not swaps?
Judge Gibbons’s opinion focused on the statutory requirement that a swap be tied to an event with a “potential financial, economic, or commercial consequence.” The panel said Kalshi’s sports contracts do not satisfy that requirement simply because traders have money riding on a game’s outcome.
The opinion drew a line between markets tied to broader economic consequences and contracts whose commercial significance comes from the wager itself. In one example, Gibbons wrote that “there is no conceivable reason why the market might need to know the probability that a broadcaster says a random word on air.” The point was not limited to that hypothetical. The panel rejected the idea that trading interest can transform any event into one with the kind of financial or commercial consequence Congress described in the Commodity Exchange Act.
That reasoning strikes at the heart of Kalshi’s federal-law argument. If sports-event contracts are not swaps, they do not gain the statutory protection Kalshi claims for CFTC-regulated derivatives markets. If they are swaps but state gambling laws are not preempted, Kalshi still faces state-by-state enforcement risk for sports products.
How does this fit with other Kalshi appeals?
The Sixth Circuit decision adds to a federal appellate split over how far state gambling regulators can go when a CFTC-regulated prediction-market exchange lists sports contracts. Three federal appellate courts have now issued rulings on core state-regulation questions involving Kalshi sports contracts: the Third Circuit sided with Kalshi in April 2026, while the Ninth Circuit and Sixth Circuit sided against the company in later decisions.
In the Third Circuit case, a divided panel ruled 2-1 for Kalshi against New Jersey, accepting the company’s argument that federal commodities law preempted state enforcement. That ruling is now before the Supreme Court through a petition for review, making the conflict between appellate courts more consequential for the industry than a single-state licensing dispute.
The Ninth Circuit ruled against Kalshi on August 28 in KalshiEX LLC v. Assad, a case involving Nevada gaming regulators. A separate Ninth Circuit decision, Blue Lake Rancheria v. Kalshi, followed on September 16 and involved tribal interests. The Sixth Circuit ruling now gives state regulators another appellate win on the broader question of whether Kalshi can rely on federal commodities law to avoid gambling enforcement tied to sports contracts.
Kalshi’s direct appellate record on the core sports-contract preemption fight now stands at one win and two losses, with the Third Circuit on one side and the Ninth and Sixth Circuits on the other. A Fourth Circuit appeal tied to Maryland remains pending, and an Eighth Circuit appeal connected to Iowa has been docketed without a merits ruling.
What did Kalshi say?
Kalshi spokesperson Dani Lever defended the company’s federal-preemption position after the ruling, saying, “markets can’t operate when the rules change at every state line, which is why Congress created a single federal regulator with nationwide rules.”
That argument captures the industry stakes. Kalshi’s model depends on listing contracts through a federally regulated exchange that can reach users nationally. State regulators, by contrast, have argued that sports contracts look and function like wagers on games, making them subject to state gambling licensing regimes regardless of the platform’s CFTC status.
The CFTC’s role remains part of the legal backdrop. Kalshi is a registered designated contract market, a status that normally gives federal commodities regulators primary oversight of listed contracts. The appellate split is about how much that federal structure matters when contracts are tied to sports outcomes, an area states have traditionally regulated through gambling and sports-wagering law.
Does this change Kalshi’s position in Ohio and Tennessee?
The ruling strengthens Ohio’s and Tennessee’s ability to enforce their gambling laws against Kalshi sports contracts, but the procedural posture differs by state. In Ohio, the Sixth Circuit affirmed a lower-court decision refusing to block enforcement by the Ohio Casino Control Commission. In Tennessee, the court vacated an injunction that had protected Kalshi from the Tennessee Sports Wagering Council’s cease-and-desist order.
For Ohio, that means Kalshi did not gain the injunction it sought against state enforcement. For Tennessee, the ruling removes the federal-court protection that had kept the state’s order from taking effect while the litigation moved forward. Any next enforcement step will depend on the regulators’ actions and on whether Kalshi seeks further review from the full Sixth Circuit or the Supreme Court.
The practical consequence is legal uncertainty for sports-event contracts listed across state lines. A platform may be federally regulated for commodities-law purposes and still face state challenges if appellate courts continue to disagree on whether sports contracts fall within the Commodity Exchange Act’s protected zone.
Why does the split matter for prediction markets?
The appellate conflict matters because it turns a series of state enforcement cases into a national question about the structure of prediction-market regulation. If Kalshi ultimately wins at the Supreme Court, CFTC-regulated exchanges could gain stronger protection from state gambling enforcement for sports contracts. If state regulators prevail, platforms may have to navigate gambling rules state by state.
That question extends beyond Kalshi. Other prediction-market operators, sportsbook incumbents, and financial platforms watching event contracts will read the Sixth Circuit decision as another signal that sports markets remain the industry’s most legally exposed category. Contracts tied to elections, economics, culture, and sports may all sit on event-market infrastructure, but courts are treating sports as the sharpest test of the boundary between federally regulated derivatives and state-regulated betting.
The Sixth Circuit’s opinion also narrows one route Kalshi had hoped to use. The panel did not merely say that these particular contracts were outside the swap definition. It also said state gambling laws would not be preempted even if the contracts were swaps. That gives Ohio and Tennessee a second legal ground to defend enforcement if the swap question changes in later litigation.
What comes next?
Kalshi’s next move is whether to seek rehearing before the full Sixth Circuit, press the Supreme Court to resolve the split, or continue litigating state cases while the justices consider the Third Circuit petition. The Supreme Court petition from the New Jersey case is now the key milestone because it presents the clearest path to a nationwide answer on preemption.
Until then, the legal map is uneven. The Third Circuit has accepted Kalshi’s federal-preemption theory, while the Ninth and Sixth Circuits have rejected it in disputes involving state gaming regulators. The pending Fourth Circuit appeal tied to Maryland could add another appellate ruling before the Supreme Court acts, but Friday’s Sixth Circuit decision already raises the cost of leaving the question unresolved state by state.
