Sixth Circuit Deals Kalshi Another Defeat: Ohio and Tennessee Can Regulate Its Sports Contracts as Gambling

Kalshi lost again on Friday. A unanimous three-judge panel of the Sixth Circuit Court of Appeals ruled that Ohio and Tennessee can regulate the prediction market's sports-event contracts as gambling — holding that the contracts are not 'swaps' under the Commodity Exchange Act and that federal commodities law does not preempt the two states' gambling statutes.

The 49-page published opinion, written by Judge Julia Smith Gibbons and joined by Judges Clay and Bloomekatz, decided two consolidated appeals — Nos. 26-3196 and 26-5235 — arising from Kalshi’s fights with gambling regulators in both states. The panel affirmed the Southern District of Ohio’s denial of Kalshi’s preliminary injunction and vacated the Middle District of Tennessee’s grant of one, remanding both cases for further proceedings.

"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.’ And, even assuming that Kalshi’s sports-event contracts are swaps, we alternatively hold that the CEA neither expressly nor impliedly preempts Ohio’s or Tennessee’s gambling laws."

Why ‘not a swap’ decides the federal question

Kalshi’s entire defense rests on a single classification: that its sports contracts are swaps traded on its CFTC-regulated exchange, which would put them inside the Commodity Futures Trading Commission’s ‘exclusive jurisdiction’ and beyond the reach of state gambling cops. The panel rejected the premise — Kalshi, it said, had not shown the contracts meet the statutory definition of a swap at all.

"Accordingly, we hold that the CEA does not expressly preempt the States’ sports-betting laws because those laws do not directly regulate DCMs but have only incidental effects on them."

The reasoning turns on what ‘exclusive jurisdiction’ actually covers. The court noted the phrase lacks the ‘preempt’ or ‘supersede’ language Congress used elsewhere in the CEA, and held it reaches only direct regulatory and enforcement authority over the licensing and operation of designated contract markets. Ohio’s and Tennessee’s laws, the panel wrote, ‘impose no restrictions on the designation or operation of contract markets as such. Instead, they regulate sports betting.’

Kalshi’s impossibility argument — that it cannot comply with both federal impartial-access rules and state-by-state gambling regimes — fared no better. The panel said the impartial-access rule requires impartial access to whatever markets an exchange offers, not every market in every state, and pointed to geofencing as a compliant path, citing Sporttrade as a working model. Kalshi had called geofencing ‘technically challenging, time-consuming, and expensive.’ The court’s answer: ‘expensive does not mean impossible.’

A 2–1 circuit split — and the Supreme Court’s doorstep

Three federal circuits have now ruled on the core question, and only one has sided with the industry. The Third Circuit backed Kalshi in April; the Ninth Circuit ruled for Nevada in late August; Friday’s Sixth Circuit decision makes the scoreboard 2–1 against the prediction markets. That is the kind of split the Supreme Court exists to settle.

The pipeline is already filling. New Jersey petitioned the justices on September 2 (No. 26-299) to review the Third Circuit’s pro-Kalshi decision; Robinhood (No. 26-338, September 10) and Crypto.com’s North American Derivatives Exchange (No. 26-344, September 11) asked the Court to take the Ninth Circuit’s Nevada ruling. Kalshi itself sought en banc rehearing in the Ninth Circuit on September 9 rather than going straight to the Supreme Court on that loss. Friday’s ruling adds a second appellate loss Kalshi must now decide how to challenge.

The fight is spreading beyond the circuits. The court noted parallel state-court and tribal-court cases moving through the system — a sign that even a Supreme Court grant would not instantly settle every front. Better Markets, which filed an amicus brief for Ohio and Tennessee, called the decision further proof that ‘Kalshi’s reading would give the CFTC jurisdiction over event contracts that bear no relation to the goals Congress had in mind.’

What each side said

Kalshi spokesperson Dani Lever said: ‘The ruling shows exactly why a state-by-state patchwork doesn’t work. Markets can’t operate when the rules change at every state line, which is why Congress created a single federal regulator with nationwide rules.’ Kalshi, for its part, said it expects to win the next round — predicting the decision won’t survive further review.

Tennessee Attorney General Jonathan Skrmetti said: ‘Kalshi attempted an end run around Tennessee law to avoid any of the rules or taxes associated with sports gambling. They failed. Sports wagering is heavily regulated because it can do a lot of harm, and I’m glad we thwarted Kalshi’s efforts to remove every safeguard and put Tennessee sports bettors at risk.’

Better Markets legal director Dominick Freda, whose group filed an amicus brief supporting the two states, said ‘under Kalshi’s preferred reading, there is no limit to the type of chance-based contract’ that would count as a financial derivative. The framing is the advocate’s, not the court’s — but the panel’s ‘not a swap’ holding lands in the same place.

What actually changes — in each state

The states’ underlying grievance is concrete: both require sports-wagering customers to be 21, while prediction markets let 18-year-olds trade. The panel also noted the states’ argument that Kalshi’s self-certification process let it list sports contracts without the CFTC ever reviewing them for compliance.

In Ohio, the ruling preserves the status quo the state wanted: the Southern District of Ohio had already denied Kalshi’s preliminary injunction, and Friday’s affirmance keeps that denial in place. The opinion caption names former Attorney General Dave Yost, who resigned effective June 7, 2026; Andy Wilson now holds the office.

In Tennessee, the practical effect is less immediate than the headline suggests. The panel vacated the preliminary injunction that had shielded Kalshi — but vacatur takes effect through the court’s mandate, and no stay or mandate timing has been reported. It would be wrong to claim Tennessee enforcement resumed on Friday. What the ruling does settle, unless a higher court intervenes, is the legal question: Tennessee’s gambling laws are not preempted.

A note on posture: these are preliminary-injunction rulings, not final judgments on the merits. The cases go back to the district courts for further proceedings — but the Sixth Circuit’s preemption analysis will be the law those courts apply.

Kalshi’s next move — and the justices’ docket

Whether Kalshi seeks en banc rehearing or goes straight to the Supreme Court on the Ohio and Tennessee ruling — and what the justices do with the three petitions already on their docket. Each new circuit loss also invites copycat enforcement: state attorneys general watching a 2–1 scoreboard have less reason to wait. The question the Sixth Circuit just answered for Ohio and Tennessee — who gets to regulate a sports bet placed on a federally registered exchange — now has three circuit rulings and only two answers. A split that deep is the kind the Supreme Court exists to resolve.