Sixth Circuit Rules Against Kalshi in Ohio, Tennessee

Jonathan Rodriguez

Written by: Jonathan Rodriguez

Published: Mon Sep 28, 2026, 7:00 am ET

Read Time: 5 minutes

Sixth Circuit Rules Against Kalshi in Ohio, Tennessee

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The Sixth Circuit Court of Appeals has ruled that Ohio and Tennessee can enforce their gambling laws against Kalshi. The decision marks another major development in the legal battle over sports prediction markets in the US.

On September 25, a three-judge panel rejected Kalshi's argument that federal law prevents states from regulating its sports event contracts. The court ruled that the contracts do not qualify as "swaps" under the Commodity Exchange Act (CEA).

The ruling also found that the CEA would not preempt Ohio or Tennessee gambling laws, even if Kalshi's contracts qualified as swaps. As a result, the court affirmed an Ohio district court decision and vacated a preliminary injunction previously granted to Kalshi in Tennessee.

Sixth Circuit Rejects Kalshi's Swap Argument

The central question involved how the CEA defines a "swap." Kalshi argued that its sports contracts fall within the federal derivatives framework.

That argument would have given the CFTC exclusive jurisdiction over the contracts. It also could have limited the states' ability to apply their gambling laws.

However, the Sixth Circuit rejected Kalshi's interpretation of the statute. The panel found that sports outcomes lack the required intrinsic connection to financial, economic, or commercial consequences.

Judge Julia Smith Gibbons wrote for the panel:

"Kalshi's sports event contracts have only downstream economic consequences, assuming they have the potential to cause economic consequences at all. Thus, they are not 'associated' with potential financial, economic, or commercial consequences, even if they may eventually lead to some down the line."

The court distinguished sports contracts from derivatives tied directly to financial risks. Those products can involve interest rates, stock prices, or other financial values.

By contrast, the panel found that sports outcomes do not inherently create the type of financial consequences contemplated by the CEA.

The court also rejected Kalshi's broader preemption argument. Even assuming the contracts were swaps, the judges found that the CEA did not expressly or implicitly prevent Ohio and Tennessee from enforcing their gambling laws.

Ohio and Tennessee's Legal Battle With Kalshi

The dispute began after state gambling regulators challenged Kalshi's sports event contracts. Both states argued that Kalshi was offering sports wagering without the required state authorization.

The Ohio Casino Control Commission sent Kalshi a cease-and-desist letter over its sports contracts. The regulator said Kalshi was offering unlicensed sports gaming to Ohio residents.

Ohio also raised concerns about Kalshi allowing people under 21 to participate. The commission later pursued a separate $5 million penalty against the company.

Kalshi responded by arguing that it operates as a federally regulated designated contract market. The company maintained that the CFTC has exclusive jurisdiction over its event contracts.

The Tennessee Sports Wagering Council took a similar position. It sent Kalshi a cease-and-desist letter after determining that the company's sports contracts violated Tennessee gambling regulations.

Kalshi then challenged Tennessee's enforcement efforts in federal court. The district court granted Kalshi a preliminary injunction, finding that the company was likely to succeed with its federal preemption argument.

Ohio reached a different result at the district court level. The Southern District of Ohio denied Kalshi's request for a preliminary injunction.

The Sixth Circuit has now resolved both appeals in favor of the states.

What the Ruling Means for US Online Sportsbooks

The decision could also affect the wider prediction-market industry. Operators offering sports event contracts now face greater uncertainty over how states can regulate their products.

For consumers familiar with US online sportsbooks, the distinction between sports betting and event contracts remains particularly important. Kalshi has maintained that its products are financial instruments rather than traditional wagers.

State regulators have taken the opposite approach in several cases. They have argued that contracts tied to sporting outcomes function as sports wagers when customers risk money on those outcomes.

The Sixth Circuit's ruling gives Ohio and Tennessee additional legal support for that position. However, the decision does not establish a nationwide rule covering every prediction market.

Instead, it adds to a growing disagreement among federal appellate courts. The Third Circuit previously sided with Kalshi in its dispute involving New Jersey.

The Ninth Circuit has taken the opposite position in litigation involving Nevada. The Sixth Circuit has now joined the Ninth Circuit in rejecting Kalshi's federal preemption theory.

Circuit Split Could Shape Kalshi's Next Steps

The conflicting appellate decisions could increase pressure for further federal review. The Third Circuit found that Kalshi was likely to succeed with its argument that its sports contracts qualify as swaps.

Meanwhile, the Sixth and Ninth Circuits have reached conclusions supporting state regulatory authority. That disagreement leaves the broader legal framework unsettled.

For Kalshi, the immediate impact is clear in Ohio and Tennessee. The company no longer has the preliminary injunction that previously restricted Tennessee enforcement.

The Ohio ruling also remains in place after the Sixth Circuit affirmed the lower court's decision. Both states can therefore continue pursuing their respective regulatory positions as the litigation proceeds.

The ruling could have wider implications for Ohio gambling, Tennessee gambling, and other state markets. It also adds another important chapter to the debate over whether prediction markets should operate under federal derivatives rules or state gambling frameworks.

For now, the Sixth Circuit has sided with state authority. However, the broader conflict over sports event contracts remains unresolved.

Jonathan Rodriguez
Jonathan Rodriguez

Jonathan is an avid basketball fan, and is often looking forward to the next upcoming NBA season when not checking players' stats during games. He also likes to keep his ears on the ground for the latest rumblings in the online casino industry.

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