Kalshi Sports Contracts Face State Gambling Laws in 4 States

The Sixth Circuit ruled Sept. 25 that Ohio and Tennessee can enforce gambling laws against Kalshi’s sports contracts, rejecting the exchange’s bid to rely on federal commodities oversight. The unanimous panel said Kalshi had not shown the contracts qualify as swaps under the Commodity Exchange Act. It also ruled that state gambling laws could apply even if the contracts are swaps, and pointed to geofencing as a workable compliance tool.

Why it matters

The ruling gives Ohio and Tennessee two independent legal routes to regulate Kalshi’s sports contracts. It affirmed an Ohio decision and vacated the preliminary injunction that had shielded Kalshi from enforcement in Tennessee, sending both cases back to lower courts. The decision applies across federal courts in Ohio, Tennessee, Michigan and Kentucky while litigation continues.

The business exposure is significant. Eilers & Krejcik Gaming estimates that 69% of Kalshi’s retail sports demand comes from states without legal online sportsbooks, with California and Texas accounting for 44%. The estimates rely on surrounding indicators because Kalshi does not publish state-level trading data. Sports contracts accounted for more than 90% of Kalshi’s trades and 95% of its 2025 revenue, according to figures cited in an earlier appellate opinion.

The court rejected Kalshi’s argument that geographic restrictions would conflict with its duties as a designated contract market. It said federal exchange rules apply to the markets an exchange chooses to list and noted that geofencing can accommodate both exchange requirements and state gaming laws. Kalshi argued that state-by-state controls would be difficult, expensive and time-consuming; the judges answered that “expensive does not mean impossible.”

Market impact

The decision adds to a growing appellate split. The Third Circuit sided with Kalshi in New Jersey, while the Ninth Circuit ruled against its preemption argument in Nevada. The Sixth Circuit has now joined the Ninth. A Fourth Circuit appeal involving Maryland remains pending, and New Jersey has asked the Supreme Court to resolve the split. Kalshi’s response is due Nov. 9; the Court has not decided whether to hear the case.

If more courts adopt the Sixth and Ninth circuits’ reasoning, Kalshi could face state-specific bans, licensing rules, age limits, taxes and location checks. Dividing access by geography could also fragment the pool of eligible traders and reduce liquidity. A ruling favoring Kalshi could instead support a nationwide market under one federal framework.