A federal appeals panel decided on Friday that both Ohio and Tennessee have the right to enforce their respective sports gambling regulations against Kalshi, dismissing the prediction market platform’s claim that federal commodities legislation protects its sports event contracts and supersedes state authority.
A three-judge panel from the United States Court of Appeals for the Sixth Circuit determined unanimously that Kalshi failed to prove these contracts satisfy the statutory definition of a “swap.” Designated contract markets like Kalshi trade swaps under the “exclusive jurisdiction” of the Commodity Futures Trading Commission (CFTC).
Furthermore, the judges ruled that even if the agreements qualified as swaps, the Commodity Exchange Act would not preempt the gambling statutes of either state.
The court affirmed Chief Judge Sarah D. Morrison’s March ruling denying Kalshi a preliminary injunction in Ohio. It reversed the injunction that Judge Aleta A. Trauger had provided to Kalshi in Tennessee during February, remanding that specific matter back to the district court.
Kalshi introduced sports event contracts in January 2025. Following an order from the Ohio Casino Control Commission demanding a halt to unlicensed offerings in the jurisdiction, Kalshi initiated legal action.
The Tennessee Sports Wagering Council released its own directive in January, targeting Polymarket and Crypto.com’s Nadex alongside Kalshi. In response, Kalshi sued and secured a temporary restraining order a few days later.
Defining a swap
Central to the dispute was a provision under Dodd-Frank defining swaps to incorporate agreements linked to any event “associated with a potential financial, economic, or commercial consequence.”
The judiciary interpreted this language to encompass solely events intrinsically tied to financial outcomes, such as interest rate hikes or debt defaults. Secondary impacts of athletic matches on advertisers, sponsors, and local economies were deemed “too attenuated, indirect, and speculative” to qualify, the court explained. The panel remained equally unpersuaded by Kalshi’s mention markets, which permit users to speculate on whether specific words will be uttered on live broadcasts.
“There is no conceivable reason why the market might need to know the probability that a broadcaster says a random word on air,” Judge Julia Smith Gibbons wrote on behalf of the panel.
The decision pointed out that Kalshi previously admitted during earlier legal proceedings that its sports event contracts possess “no inherent economic significance.”
Given that federal guidelines mandate swaps to occur on regulated exchanges, the court observed that Kalshi’s interpretation would “attach criminal penalties to a breathtaking amount of commonplace [gambling] activity.” Such an outcome would encompass “every sports wager placed in a casino, on an online sports book, or between two friends at a bar,” according to the court, which cited an amicus brief submitted by former CFTC Chair Gary Gensler.
Regarding the preemption argument, the judges concluded that the statutes in Ohio and Tennessee govern sports wagering while exerting merely an incidental impact on exchanges like Kalshi.
Dani Lever, a spokesperson for Kalshi, informed Courthouse News that the organization disagreed with the verdict.
“The law does not require a swap to involve ‘intrinsic’ financial consequences — and even if it did, sports clearly do,” Lever stated.
Lever noted that the ruling demonstrated “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,” Lever added.
Circuit split leaves Kalshi 1-for-3
The Ninth Circuit ruled against Kalshi regarding a Nevada dispute on August 28. Conversely, the Third Circuit voted 2-1 in favor of Kalshi against New Jersey in April.
These ongoing legal battles could ultimately reach the Supreme Court. New Jersey Attorney General Jennifer Davenport petitioned the U.S. Supreme Court on September 2 to evaluate that determination. Meanwhile, Kalshi’s appeal involving a Maryland case remains active before the Fourth Circuit, as indicated in Friday’s opinion.
The CFTC, which asserts exclusive jurisdiction over prediction markets under Chair Michael Selig (who also serves as the commission’s sole member), filed an amicus brief supporting Kalshi during the Ohio appeal back in May.
Over twelve states have initiated enforcement measures or lawsuits against Kalshi over its sports-related contracts, including Connecticut and Michigan.
As reported by The Block’s data dashboard, Kalshi generated $38.67 billion in trading volume throughout August.
Kalshi did not provide an immediate reply when requested by The Block for comment.
Originally published at https://www.theblock.co/news/regulation/2026-09-26-kalshi-loses-appeal-over-ohio-and-tennessee-sports-betting-laws-widening-circuit-split-416937.
