Appeals Court Confirms State Authority Over Kalshi’s Sports Contracts
The 6th U.S. Circuit Court of Appeals ruled on September 25, 2026, that Ohio and Tennessee can enforce their state gambling laws on Kalshi’s sports-related event contracts. This unanimous decision by a three-judge panel rejects Kalshi’s claim that its sports contracts are federally regulated swaps under Commodity Futures Trading Commission (CFTC) jurisdiction, reinforcing states’ regulatory power over prediction markets tied to sports events.
This ruling marks a significant legal setback for Kalshi and similar platforms, intensifying a national debate over whether such markets should be regulated as financial derivatives or as gambling. It follows other recent circuit court decisions that have produced conflicting interpretations, setting the stage for a potential Supreme Court review.
Legal Background and Regulatory Conflict
Kalshi argues that all event contracts on its platform qualify as swaps, a category of financial derivatives regulated exclusively by the CFTC under the Commodity Exchange Act. However, Ohio and Tennessee contend these sports-related contracts are a form of gambling, subject to their state laws on sports betting. The 6th Circuit panel found that Kalshi failed to demonstrate its contracts met the statutory definition of swaps, thus allowing states to apply their gambling regulations.
The decision overturned a previous federal district court ruling in Tennessee that had favored Kalshi but affirmed a similar district court ruling in Ohio supporting state authority. This legal tug-of-war highlights the complexity of classifying new fintech products that blur lines between financial instruments and gambling activities.
Implications for Prediction Market Operators
With two recent appellate court losses—this 6th Circuit ruling and a separate 9th Circuit ruling affirming Nevada’s regulatory rights—operators like Kalshi face an increasingly fragmented regulatory landscape. The 9th Circuit ruled last month that Nevada can regulate sports-related event contracts as bets, while the 3rd Circuit in April sided with New Jersey, granting the CFTC exclusive jurisdiction over swaps regardless of contract type.
This patchwork of rulings complicates market operations that cross state lines, as platforms must navigate varying state laws and regulatory regimes. Kalshi’s spokesperson noted the challenges of inconsistent regulation and urged Congress to empower a single federal regulator with nationwide authority to provide uniform rules for these markets.
Stakeholder Positions and Economic Stakes
Tennessee Attorney General Jonathan Skrmetti emphasized the importance of state regulation to protect consumers, stating Kalshi sought to circumvent Tennessee’s rules and taxes on sports gambling. He highlighted the risks associated with unregulated sports wagering and the need for safeguards, reflecting concerns about potential harms from loosely regulated markets.
Conversely, Kalshi asserts that a national regulatory framework overseen by the CFTC is necessary for legal clarity and market stability. The dispute affects not only Kalshi but also the broader fintech sector exploring event contracts with real economic impact, where distinctions between gambling and financial trading are increasingly blurred.
Next Steps and Supreme Court Prospects
Following these circuit court rulings, the legal battle is expected to continue at the highest judicial level. New Jersey has petitioned the U.S. Supreme Court to resolve the conflicting appeals court decisions on the scope of CFTC authority versus state regulation of sports-related event contracts. It remains uncertain when or if the Supreme Court will take up the issue amid ongoing disputes in multiple jurisdictions.
Meanwhile, the CFTC has initiated lawsuits against nine states defending its claimed exclusive jurisdiction over event contracts. The agency has yet to comment publicly on the 6th Circuit ruling. This evolving legal environment will shape the regulatory framework for fintech platforms operating prediction markets across the United States.
Takeaway: The 6th Circuit’s decision strengthens states’ rights to regulate sports prediction markets, complicating federal oversight and signaling a likely Supreme Court showdown to define regulatory boundaries.