Hassan Maishera
TL;DR
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A federal appeals court ruled that Ohio and Tennessee can enforce their sports gambling laws against Kalshi’s sports event contracts.
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The Sixth Circuit said Kalshi had not shown that the contracts qualify as swaps under federal commodities law.
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The judges also found that federal law would not override the states’ gambling laws even if the contracts were swaps.
A federal appeals court has dealt Kalshi another setback in its dispute with state gambling regulators, ruling Friday that Ohio and Tennessee may enforce their sports betting laws against the prediction markets platform.
A unanimous three-judge panel of the U.S. Court of Appeals for the Sixth Circuit rejected Kalshi’s argument that federal commodities law gives the Commodity Futures Trading Commission exclusive authority over its sports event contracts.
The court said Kalshi had not shown that those contracts meet the legal definition of a swap. It added that, even if they did, the Commodity Exchange Act would not prevent either state from applying its gambling laws.
Court Rejects Kalshi’s Swap Argument
The dispute centered on a provision of federal law that includes certain contracts tied to events associated with a potential financial, economic, or commercial consequence in its definition of a swap.
Kalshi argued that sports results can have economic effects on advertisers, sponsors, and local businesses. The court found those effects too indirect and speculative.
In the panel’s view, the provision covers events with an inherent financial connection, such as changes in interest rates or a debt default.
The judges also rejected an argument concerning Kalshi’s contracts on whether particular words would be spoken during a broadcast. The opinion noted that Kalshi had previously conceded its sports event contracts have no inherent economic significance.
On the separate question of state authority, the court found that Ohio and Tennessee regulate sports betting, even if their laws also affect a federally regulated exchange such as Kalshi.
Tennessee Injunction Lifted as Ohio Ruling Stands
The Sixth Circuit upheld a March decision denying Kalshi a preliminary injunction against Ohio regulators. It also vacated a February injunction that had prevented Tennessee from enforcing its rules against the company and returned that case to the district court.
Kalshi began listing sports event contracts in January 2025. Ohio’s Casino Control Commission subsequently ordered it to stop offering them without a state license. Tennessee’s Sports Wagering Council issued a similar order, prompting Kalshi to sue in both states.
Kalshi spokesperson Dani Lever said the company disagreed with Friday’s decision and expected it to face further review. She argued that the law does not require swaps to have “intrinsic” financial consequences and said differing state rules make it difficult to operate nationwide.
Conflicting Appeals Rulings Raise Stakes
The Sixth Circuit decision adds to a split among federal appeals courts. The Ninth Circuit ruled against Kalshi in a Nevada dispute in August, while the Third Circuit sided with the company in a New Jersey case in April.
New Jersey’s attorney general has asked the U.S. Supreme Court to review the Third Circuit ruling. Kalshi also has an appeal pending before the Fourth Circuit in a Maryland case, according to Friday’s opinion.
Earlier this month, a Michigan court ordered Kalshi to keep sports event contracts blocked and use licensed geolocation services or face fines of $500,000 per day.
The conflicting decisions leave the broader question of how federal commodities rules and state gambling laws apply to sports event contracts unresolved.
