A federal appeals court ruled on Friday that Kalshi’s sports-related event contracts are not swaps, a decision that clears the way for Ohio and Tennessee to regulate the prediction-market operator under their own gambling laws instead of the Commodity Futures Trading Commission’s rules. The unanimous Sixth Circuit panel set out its reasoning in a published opinion resolving two appeals Kalshi brought against regulators in both states.
What the court held
Writing for the panel, Circuit Judge Julia Smith Gibbons said Kalshi had failed to show that its sports-event contracts meet the Commodity Exchange Act’s definition of a swap, which would place them under the CFTC’s exclusive jurisdiction. “We hold that Kalshi has not shown that its sports-event contracts satisfy the statutory definition of a ‘swap’ so as to fall within the scope of the CFTC’s ‘exclusive jurisdiction,'” the ruling states. The judges added that even if the contracts were swaps, the CEA neither expressly nor impliedly preempts Ohio’s or Tennessee’s gambling laws. The panel affirmed an Ohio district court that had denied Kalshi’s request to block enforcement, and reversed a Tennessee district court that had sided with the company.
How the cases reached the appeals court
Kalshi self-certified its sports-event contracts with the CFTC and began listing them, drawing scrutiny from state regulators who argue the products amount to sports betting. The Ohio Casino Control Commission and the Tennessee Sports Wagering Council moved to enforce their gambling laws, prompting Kalshi to seek injunctions in federal court. A lower court in Ohio denied that request while a Tennessee court granted it, setting up the conflicting rulings the appeals court resolved on Friday.
A widening split over prediction markets
The decision follows a Ninth Circuit ruling last month that Nevada can regulate Kalshi’s sports contracts as sports bets, creating a split between federal appeals courts that could push the dispute to the Supreme Court. It also lands as the broader prediction-market industry faces mounting legal pressure, from New York’s lawsuit against Polymarket over an unlicensed gambling operation to separate enforcement efforts in more than a dozen states.
What it means for Kalshi
Kalshi said it disagreed with the ruling and does not expect it to survive further review, arguing the decision shows why a state-by-state patchwork does not work. The company has continued to expand its institutional business, opening its prediction markets to institutions through a Cantor Fitzgerald integration, even as the sports contracts that drive much of its trading volume now face a patchwork of state rules rather than a single federal framework.
