Appeals court says states can regulate Kalshi’s sports prediction contracts

# Ruling overview

A three-judge panel of the 6th U.S. Circuit Court of Appeals unanimously ruled that Ohio and Tennessee may apply their gambling laws to Kalshi's sports-related event contracts. The court concluded Kalshi did not prove those contracts qualify as "swaps" under the Commodity Exchange Act (CEA), which would place them under exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC).

# Why the court rejected Kalshi's argument

Kalshi and similar platforms argue that event contracts are financial derivatives called swaps, regulated federally by the CFTC. The appeals court disagreed. It said Kalshi failed to show its sports contracts meet the statutory definition of a swap and, even if they did, the CEA does not preempt Ohio's and Tennessee's gambling laws.

The decision overturned a Tennessee district court ruling that had sided with Kalshi and affirmed an Ohio district court ruling that matched the states' position.

# Legal context and recent rulings

The 6th Circuit's decision follows a 9th Circuit ruling last month that Nevada can regulate sports-related event contracts as sports bets. By contrast, the 3rd Circuit earlier sided with the CFTC and found federal authority over swaps. Those conflicting circuit opinions create a split in the federal courts, which makes Supreme Court review likely but not certain.

Tennessee Attorney General Jonathan Skrmetti said Kalshi tried to avoid state rules and taxes tied to sports gambling and that the ruling thwarts that effort. Kalshi's spokesperson Dani Lever said the company disagreed and argued a state-by-state regulatory patchwork doesn't work, pointing to inconsistent court outcomes across jurisdictions.

# What this means for prediction-market platforms

Platforms that offer sports-related event contracts now face greater exposure to state gambling regulation in some circuits. Legal outcomes vary by circuit court, so where a platform operates or serves users could determine whether its contracts are treated as bets under state law or as swaps under federal law.

For platforms, consequences include potential state licensing requirements, taxes, advertising limits, consumer protections, and enforcement actions where states view the products as gambling. For states, the ruling affirms the ability to use state statutes to regulate or restrict such products.

# Likelihood of Supreme Court review

Because circuit courts have reached different results, the question of whether sports-related event contracts are governed by federal swap rules or state gambling laws is now a prime candidate for Supreme Court review. The article notes the 3rd Circuit decision led New Jersey to petition the Supreme Court earlier in the year, and the latest decisions increase the chance the high court will get involved to resolve the split.

# Immediate practical takeaways

• Prediction-market platforms offering sports contracts should review where they operate and prepare for state-level enforcement in circuits that permit state regulation.
• States that consider such contracts gambling have legal backing in multiple circuits to apply their laws.
• The regulatory landscape remains unsettled until the Supreme Court or Congress provides a definitive ruling or new legislation clarifies federal versus state authority.

# Bottom line

The 6th Circuit's ruling adds momentum to the view that states can regulate sports-related event contracts as gambling, increasing legal and operational risk for platforms that treat those contracts as federally regulated swaps. Conflicting circuit decisions make a final resolution at the Supreme Court increasingly likely.