Kalshi Loses Sixth Circuit Appeal over Ohio and Tennessee Gambling Laws

CINCINNATI – The Sixth Circuit has allowed Ohio and Tennessee to enforce state gambling laws against Kalshi’s sports-event contracts. The ruling removes Kalshi’s Tennessee injunction and leaves the Ohio denial in place while both cases continue.

The three-judge panel rejected Kalshi’s argument that its sports contracts fall exclusively under federal Commodity Futures Trading Commission oversight. In its published opinion, the court held that Kalshi had not shown the contracts meet the statutory definition of a swap under the Commodity Exchange Act.

Court Rejects Kalshi’s Swap Argument

Kalshi has argued that sports-event contracts traded on its federally regulated designated contract market are swaps, placing them within the CFTC’s exclusive jurisdiction and beyond state gambling regulation. Ohio and Tennessee regulators have taken the opposite position, treating the products as sports wagering subject to state licensing and gambling laws.

The Sixth Circuit sided with the states at the preliminary-injunction stage. The court also held that even if Kalshi’s sports contracts qualified as swaps, the Commodity Exchange Act would not expressly or implicitly preempt the gambling laws challenged in Ohio and Tennessee.

The judges questioned whether contracts tied to outcomes such as the number of corner kicks in a soccer game or complex sports parlays fit the financial-risk purposes associated with swaps. The panel concluded that Kalshi had not established the necessary connection between its sports contracts and financial or economic consequences contemplated by the federal statute.

Tennessee Injunction Vacated as Ohio Ruling Stands

The consolidated appeal produced different consequences for the two underlying cases. A federal district court in Ohio had previously refused to block state regulators from enforcing gambling laws against Kalshi, while a Tennessee federal court granted the company a preliminary injunction.

The Sixth Circuit affirmed the Ohio decision and vacated the Tennessee injunction. Both cases were sent back to the lower courts for further proceedings, meaning the appeals decision does not constitute a final ruling on all claims in the underlying lawsuits.

Kalshi said it expects the decision to be overturned and has continued to argue that a state-by-state regulatory system conflicts with the federal framework governing designated contract markets. Tennessee Attorney General Jonathan Skrmetti, whose office had asked the appeals court to reverse the Tennessee injunction, welcomed the decision.

Federal Courts Remain Split over Prediction Markets

The Sixth Circuit ruling adds another decision to a growing divide among federal appeals courts over sports prediction markets. The Third Circuit previously granted Kalshi protection from New Jersey enforcement at the preliminary-injunction stage, while the Ninth Circuit reached the opposite conclusion in Nevada.

In August, the Ninth Circuit allowed Nevada gambling enforcement against Kalshi, finding that the company had not shown it was likely to establish that federal commodities law preempts state regulation of its sports contracts.

Other disputes are still moving through federal courts. Kalshi has also taken its Connecticut dispute to the Second Circuit, while the Sixth Circuit noted that a separate appeal remains pending in the Fourth Circuit.

The conflicting appellate decisions leave the boundaries between federal commodities oversight and traditional state gambling authority unsettled. The Ohio and Tennessee cases will now return to their respective federal district courts, where the underlying litigation can continue without the Tennessee preliminary injunction that had protected Kalshi from state enforcement.

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