Sixth Circuit Rules Against Kalshi in State Betting Dispute

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Altay Celikkaya

Content Manager

Updated: 28/09/26

Reading Time: 3 minutes

The Sixth US Circuit Court of Appeals has ruled that Kalshi cannot rely on federal commodities law to block Ohio and Tennessee from applying their gambling laws to its sports-event contracts. The unanimous three-judge panel issued its decision on 25 September in consolidated appeals involving regulators in both states.

The court held that the contracts are not swaps within the Commodity Futures Trading Commission’s exclusive jurisdiction. It also ruled that, even if the products were treated as swaps, the Commodity Exchange Act would not pre-empt the states’ gambling laws.

Kalshi logo beside the Sixth Circuit seal and a US federal courthouse following a state gambling law ruling

Regulation & Compliance

Key Takeaways From the Kalshi Ruling

Kalshi’s sports-event contracts do not meet the Commodity Exchange Act’s definition of a swap, according to the Sixth Circuit.
The court found that federal commodities law neither expressly nor impliedly pre-empts the Ohio and Tennessee gambling laws at issue.
Ohio’s denial of preliminary protection for Kalshi remains in place.
A preliminary injunction that had protected Kalshi from enforcement by Tennessee officials has been vacated.
The decision deepens a split between federal appeals courts over how sports-event contracts should be regulated.

Sixth Circuit Draws a Limit Around CFTC Jurisdiction

Kalshi operates a federally regulated designated contract market and has argued in several cases that the Commodity Exchange Act gives the CFTC exclusive authority over contracts traded on its platform.

In its published opinion, the Sixth Circuit examined whether Kalshi’s sports-event contracts met the statutory definition of a swap. Although the contracts depend on whether an event occurs, the court found that the sporting events were not associated with the type of potential financial, economic or commercial consequence required by the statute.

The panel therefore held that the contracts fall outside the CFTC’s exclusive jurisdiction. It also rejected Kalshi’s alternative argument that the Commodity Exchange Act displaced state gambling laws, finding no express, field or conflict pre-emption.

Senior Circuit Judge Julia Smith Gibbons said:

It is the states, rather than the federal government, that are best suited to regulate sports betting.

Ohio Protection Denied as Tennessee Injunction Falls

The two appeals reached the Sixth Circuit from different procedural positions.

In Ohio, a federal district court had denied Kalshi’s request for a preliminary injunction that would have prevented state officials from taking enforcement action while the litigation continued. The Sixth Circuit affirmed that decision.

In Tennessee, a federal district court had granted Kalshi preliminary protection against enforcement by state officials. The appeals court vacated that injunction and sent the case back for further proceedings consistent with its opinion.

The judgment arose at the preliminary-injunction stage, but its legal holdings are significant for both cases. It does not establish one rule for every prediction-market product or bind courts outside the Sixth Circuit, which covers Kentucky, Michigan, Ohio and Tennessee.

The procedural position is comparable to Iowa’s preliminary ruling, where a federal court found that Kalshi had not demonstrated a sufficient likelihood of success on its federal pre-emption claim. That decision also left the underlying litigation unresolved.

Prediction Markets Face Wider State Enforcement

State scrutiny of sports-related event contracts is not limited to Kalshi. New York’s Polymarket lawsuit alleges that the platform operated an unlicensed gambling business in the state.

The New York dispute raises the same central regulatory question: whether federal oversight of prediction-market products prevents states from imposing their own gambling licensing and consumer-protection requirements.

Circuit Split Increases Compliance Risk

The Sixth Circuit’s decision follows conflicting appellate outcomes elsewhere. The Third Circuit previously upheld preliminary protection for Kalshi in a New Jersey dispute, while the Ninth Circuit allowed Nevada to apply its gambling laws to the company’s sports-event contracts.

State pressure is also developing outside the courts. Missouri’s enforcement action directed six prediction-market operators, including Kalshi, to stop offering sports-event contracts unless they comply with the state’s sports betting framework.

For prediction-market operators and their B2B partners, these developments mean federal market designation may not provide a uniform shield from state gambling rules. Businesses may need to assess licensing, geolocation, age controls, responsible gambling requirements and tax exposure on a state-by-state basis while further appeals and legislative debates continue.