The U.S. Court of Appeals for the Sixth Circuit ruled on September 25, 2026, that Ohio and Tennessee may enforce their sports-betting laws against Kalshi’s sports-event contracts.
The unanimous decision rejected Kalshi’s central argument that its sports contracts qualify as federally regulated swaps and therefore fall exclusively under the Commodity Futures Trading Commission’s jurisdiction.
The court also reached a broader alternative conclusion: even if the contracts were swaps, the federal Commodity Exchange Act would not prevent Ohio and Tennessee from applying their existing gambling laws.
That combination makes the ruling more consequential than a narrow procedural loss. It supports state authority over products that resemble sports wagers even when those products are listed on a federally regulated prediction exchange.
The Sixth Circuit Combined Two Kalshi Cases
The decision joined two related cases: KalshiEX LLC v. Schuler, arising from Ohio, and KalshiEX LLC v. Orgel, arising from Tennessee.
Kalshi began offering sports-event contracts in early 2025. Its markets allow participants to purchase positions based on whether a specified outcome will occur, including the winner of a game, player statistics and other measurable sports events.
The Ohio Casino Control Commission and Tennessee Sports Wagering Council later warned that those products violated their respective sports-betting laws. Kalshi responded by filing federal lawsuits seeking to prevent both states from taking enforcement action.
The two district courts initially reached different outcomes.
In Ohio, U.S. District Judge Sarah Daggett Morrison denied Kalshi’s request for a preliminary injunction. In Tennessee, U.S. District Judge Aleta Arthur Trauger granted preliminary protection that temporarily prevented the state from enforcing its rules against the exchange.
The Sixth Circuit reviewed both disputes together. It affirmed the denial of preliminary relief in Ohio and vacated the order that had blocked Tennessee’s enforcement activity. opn.ca6.uscourts.gov
| Case | District-Court Result | Sixth Circuit Result |
|---|---|---|
| Ohio | Kalshi’s injunction request was denied | Denial affirmed |
| Tennessee | Enforcement against Kalshi was temporarily blocked | Injunction vacated |
| Central federal issue | Whether sports contracts are protected from state law | Court ruled state laws may apply |
The opinion was written by Circuit Judge Julia Smith Gibbons and joined by Judges Eric Clay and Rachel Bloomekatz. The cases were argued on July 30 before the ruling was issued on September 25.
Kalshi Argued Its Sports Contracts Were Federal Financial Products
Kalshi operates a designated contract market regulated by the CFTC. It has relied on that federal status to argue that state gambling regulators cannot control the products listed on its exchange.
The legal theory depended heavily on the Commodity Exchange Act’s treatment of swaps. Under Kalshi’s interpretation, a sports-event contract could qualify as a swap because the outcome of a sporting event may be associated with financial, economic or commercial consequences.
The company pointed to the economic activity surrounding professional sports. Teams, broadcasters, advertisers, sponsors, retailers and local businesses can all experience financial effects when games or championships produce particular outcomes.
If its sports contracts were swaps, Kalshi argued, the CFTC’s exclusive jurisdiction over qualifying products traded on a designated contract market would displace conflicting state regulation.
The Sixth Circuit accepted that a sports contest is an “event” within the statutory language. It rejected the next step of Kalshi’s argument, however, finding that the event must be inherently connected to a financial, economic or commercial consequence.
The Sixth Circuit’s published opinion distinguished sports outcomes from products linked directly to interest rates, debt defaults, currencies or other financial measurements.
The Court Rejected Downstream Economic Consequences
The Sixth Circuit concluded that the economic consequences Kalshi identified were too indirect to transform its sports-event contracts into swaps.
A championship can increase merchandise sales, advertising value or local economic activity. Those effects, however, arise from later decisions made by businesses, customers and other market participants. They are not inherent financial consequences of the sporting result itself.
The court used narrower sports markets to illustrate the problem. Contracts involving corner kicks, player statistics, words spoken during broadcasts or combined sports outcomes may generate trading activity, but they are not ordinarily used to hedge an underlying commercial risk.
That separates them from conventional derivatives. An interest-rate contract, for example, can help a lender manage a direct financial exposure created by changing rates. A contract predicting whether a broadcaster will say a particular word does not serve the same economic function.
The panel therefore found that Kalshi had not demonstrated that its sports contracts met the statutory definition of swaps. It also rejected the broader position that every agreement traded on a designated contract market automatically enters the CFTC’s exclusive jurisdiction.
This part of the opinion could affect more than contracts predicting game winners. It establishes a test based on the nature of the underlying event and the closeness of its economic consequences rather than simply the federal status of the platform listing it.
State Gambling Laws Were Not Preempted
The Sixth Circuit also considered what would happen if Kalshi’s sports-event contracts were treated as swaps.
Even under that assumption, the panel concluded that the Commodity Exchange Act would not expressly or implicitly preempt Ohio and Tennessee’s sports-betting laws.
The court distinguished regulation of a federally designated exchange from regulation of gambling activity offered through that exchange. Ohio and Tennessee were not attempting to control the CFTC’s process for approving exchanges, setting liquidity standards or supervising the internal operation of derivatives markets.
Instead, they were applying laws directed at sports betting. Any burden those laws placed on Kalshi’s exchange was incidental to the states’ regulation of gambling products available within their borders.
The opinion also relied on federalism principles. Gambling has traditionally been regulated by states and tribal governments, so a major transfer of that authority to a federal commodities regulator would ordinarily require clear language from Congress.
The panel found no sufficiently clear statement eliminating state authority over sports wagering.
The Tennessee Attorney General’s summary of the decision says the ruling lifts the order that had prevented Tennessee from enforcing its gambling laws against Kalshi. Attorney General Jonathan Skrmetti characterized the result as a defense of the state’s power to impose licensing, tax and consumer-protection requirements.
The Ruling Does Not Create A Nationwide Kalshi Ban
The Sixth Circuit’s decision does not itself prohibit every Kalshi market or remove the platform throughout the United States.
The litigation concerns sports-event contracts and the application of Ohio and Tennessee gambling laws. It does not establish that every political, economic, cultural or weather-related prediction contract is gambling.
The decision also arose during preliminary-injunction proceedings. It determines whether Kalshi demonstrated sufficient grounds to prevent state enforcement while the underlying cases continue. The court’s statutory findings are significant, but additional litigation and appeals remain possible.
Its most immediate effects are procedural:
- Ohio remains free from a federal preliminary injunction protecting Kalshi.
- Tennessee is no longer restrained by the district court’s earlier order.
- State agencies can resume or continue enforcement under their respective laws.
- Kalshi can pursue additional appellate options or continue litigating the merits.
Availability may therefore change by location, contract type and later court order. Users should not assume that the ruling creates identical rules in every state.
The Sixth Circuit covers Kentucky, Michigan, Ohio and Tennessee, but the consolidated cases directly concerned enforcement actions initiated by Ohio and Tennessee. Regulators elsewhere must rely on their own laws and applicable federal precedent.
The Decision Deepens A Federal Circuit Split
The Sixth Circuit did not write on a blank legal slate. Federal appellate courts have already divided over whether the Commodity Exchange Act protects Kalshi’s sports-event contracts from state gambling regulation.
The Third Circuit previously supported Kalshi’s federal-preemption position in litigation involving New Jersey. That result prevented New Jersey from enforcing its gambling rules against the exchange during the relevant stage of that case.
The Ninth Circuit subsequently reached the opposite conclusion in a Nevada dispute. It allowed Nevada regulators to apply state gaming law rather than treating Kalshi’s federal exchange status as a complete shield.
The Sixth Circuit now joins the state-favorable side of that divide. Two circuits have supported state enforcement, while another adopted an interpretation more favorable to Kalshi.
The industry analysis of the Sixth Circuit decision notes that New Jersey has petitioned the U.S. Supreme Court to review the Third Circuit ruling. Other litigation remains active, including a Fourth Circuit appeal.
A circuit split increases the likelihood of Supreme Court interest, but review is not automatic. The justices decide which petitions to accept, and they may wait for additional appellate decisions or further development in the underlying cases.
Until a nationwide rule emerges, prediction-market access could become increasingly dependent on geography.
Ohio And Tennessee Can Apply Their Existing Regulatory Systems
The ruling supports the ability of both states to treat sports-event contracts according to their existing gambling laws.
That matters because licensed sportsbooks operate under requirements that do not necessarily apply to federally regulated prediction exchanges in the same form. State systems can include licensing investigations, minimum-age rules, tax collection, advertising restrictions, responsible-gambling programs and limits on approved wagering categories.
Ohio regulators previously alleged that Kalshi offered sports gaming without a state license, including access for people younger than Ohio’s minimum age for regulated sports betting. The Ohio Casino Control Commission also pursued a separate proposed financial penalty connected to the alleged unlicensed offering.
Tennessee’s Sports Wagering Council issued its own cease-and-desist direction before Kalshi filed suit. The state regulates online sports wagering through a licensing and tax structure that applies to approved sportsbook operators.
Allowing one sports-wagering format to operate outside those systems could create different compliance standards for products based on similar events.
The Sixth Circuit did not declare that prediction exchanges and sportsbooks are identical in every respect. Its ruling instead removes Kalshi’s asserted federal barrier to state enforcement. Ohio and Tennessee must still act through their own laws and administrative procedures.
Prediction Exchanges And Sportsbooks Use Different Market Structures
Kalshi’s sports contracts and conventional sportsbook wagers can concern the same real-world outcome, but their market structures differ.
A sportsbook typically sets prices, accepts wagers and manages its exposure as the counterparty. A prediction exchange allows participants to purchase and sell positions, with prices formed through market activity.
That distinction affects liquidity, pricing and settlement. It does not necessarily resolve whether the underlying activity constitutes gambling under a particular state’s law.
The Sixth Circuit focused on the substance of the sports-event contracts and the federal statutes invoked by Kalshi. Listing a product on a CFTC-regulated exchange did not automatically make the product a swap or eliminate state authority over the activity.
This reasoning follows the state-authority concerns examined in gclubgod.com’s analysis of the Utah ruling involving Kalshi’s sports markets. That case also rejected the idea that federal exchange regulation necessarily prevents a state from applying its gambling restrictions.
The accumulated decisions show why platform terminology cannot settle the issue. Calling a product a contract, trade, prediction or wager does not determine its legal classification. Courts instead examine statutory definitions, product mechanics and the authority claimed by competing regulators.
State Regulation Brings Taxes And Player Protections Into Focus
The dispute is not limited to which government agency has jurisdiction. It also concerns the obligations attached to sports-related gambling products.
Licensed sportsbooks can be required to verify age and location, participate in exclusion programs, provide responsible-gambling tools and pay state taxes. Prediction platforms operate under federal market-integrity rules, but those rules were designed principally for commodities and derivatives markets.
The two frameworks address different risks. CFTC requirements can cover exchange operations, reporting, market manipulation, financial resources and contract-market integrity. State gambling regulators focus more directly on wagering access, promotional conduct, player protection and local tax collection.
The Sixth Circuit did not find that federal regulation lacks value. It determined that CFTC oversight does not necessarily displace state laws aimed at sports betting.
That outcome gives Ohio and Tennessee greater ability to require comparable protections across products tied to sporting events. It also increases the compliance burden for platforms seeking to operate nationally through a single federal structure.
For consumers, the practical challenge is fragmentation. A contract may remain available in one jurisdiction while being restricted in another, even though the exchange and event are the same.
The Next Phase Will Be Defined By Enforcement And Appeals
The Sixth Circuit’s ruling gives Ohio and Tennessee an important legal advantage, but it does not end the national dispute over prediction-market sports contracts.
State regulators must now decide how to use the authority recognized by the court. Available options may include licensing demands, access restrictions, administrative proceedings or penalties authorized under state law.
Kalshi must decide whether to alter its offerings in the affected states, continue the litigation, seek rehearing or ask the Supreme Court to intervene. Future platform changes could occur before the cases reach a final judgment.
The larger legal question remains unresolved across the country. The Third Circuit’s approach favors broader federal protection, while the Sixth and Ninth Circuits preserve more room for state gambling enforcement.
For sportsbook operators, prediction exchanges and regulators, that inconsistency makes a national resolution increasingly important. Until Congress or the Supreme Court establishes a clearer boundary, sports-event contracts will continue operating inside overlapping federal and state systems.
The September 25 decision moves that boundary toward state authority in Ohio and Tennessee. Its lasting significance will depend on whether other courts follow the Sixth Circuit—and whether the Supreme Court eventually decides that the disagreement can no longer remain regional.
