TheBlock
A unanimous three-judge Sixth Circuit panel ruled Friday that Ohio and Tennessee can enforce their sports gambling laws against Kalshi. It rejected the platform’s argument that federal commodities law shields its sports event contracts, holding that Kalshi had not shown the contracts qualify as swaps under the law.
The court also said that even if the contracts were swaps, the Commodity Exchange Act would not preempt the states’ gambling laws. It upheld the denial of Kalshi’s request for a preliminary injunction in Ohio and vacated a preliminary injunction it had won in Tennessee, sending that case back to the district court.
Why it matters
The decision adds to a widening split among federal appeals courts over the boundary between federal oversight of prediction markets and state authority over sports betting. The Third Circuit sided with Kalshi in a New Jersey case in April, while the Ninth Circuit ruled against it in a Nevada case on Aug. 28. An appeal involving Maryland remains pending before the Fourth Circuit, and New Jersey’s attorney general has asked the Supreme Court to review the Third Circuit decision.
The Sixth Circuit read the legal definition of a swap narrowly, saying the relevant event must be inherently tied to a financial consequence. It found that a sports game’s effects on sponsors, advertisers and local businesses were too indirect and speculative. The panel also said that treating sports contracts as swaps could extend federal law to commonplace gambling activity.
Market impact
The ruling leaves Kalshi’s sports contracts exposed to state enforcement in Ohio and Tennessee and could add to uncertainty for prediction markets operating across state lines. More than a dozen states have taken enforcement action or filed lawsuits over Kalshi’s sports contracts. The CFTC filed a brief supporting Kalshi in the Ohio appeal, arguing for its authority over prediction markets.
Kalshi recorded $38.67 billion in trading volume in August, according to The Block’s data dashboard.
Frequently asked questions
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Why did the Sixth Circuit reject Kalshi’s federal-law argument?
The panel said Kalshi had not shown that its sports event contracts meet the legal definition of swaps. It also ruled that federal law would not preempt Ohio and Tennessee gambling laws even if the contracts were swaps.
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What changed for Kalshi’s cases in Ohio and Tennessee?
The court upheld the denial of a preliminary injunction in Ohio and vacated the injunction Kalshi had obtained in Tennessee. The Tennessee case returns to the district court.
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How does the ruling add to the circuit split?
The Sixth and Ninth Circuits have ruled against Kalshi in state sports betting disputes, while the Third Circuit sided with it in a New Jersey case. A Maryland appeal remains pending before the Fourth Circuit.
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What did the Sixth Circuit say counts as a swap-related event?
The panel read the law to cover events inherently tied to financial consequences, such as interest-rate changes or debt defaults. It found the economic effects of sports games too indirect and speculative.
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Why could the case reach the Supreme Court?
The appeals courts have reached conflicting conclusions, and New Jersey’s attorney general has asked the Supreme Court to review the Third Circuit ruling. A Maryland appeal is also still pending.
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