The U.S. Sixth Circuit Court of Appeals became the second federal appeals court to rule against the prediction market operator Kalshi.
Key Takeaways
- The Middle District of Tennessee granted Kalshi’s motion for a preliminary injunction against the state of Tennessee in February.
- The Southern District of Ohio denied Kalshi a preliminary injunction in March that would have allowed its continued operation in the state while its case was under consideration
- The Sixth Circuit sided with both Ohio and Tennessee, affirming the lower court decision in Ohio and vacating the lower court decision in Tennessee.
The United States Court of Appeals for the Sixth Circuit ruled against the prediction market operator Kalshi on Friday in cases involving Ohio and Tennessee gambling laws.
JUST IN: The Sixth Circuit ruled against Kalshi and in favor of Ohio and Tennessee, who want to regulate prediction platforms like gambling. This now means 2 federal appeals courts have ruled for the states, while 1 ruled in favor of prediction companies. SCOTUS looms.
— Marshall Cohen (@MarshallCohen) September 25, 2026
Both Ohio and Tennessee argued that Kalshi was violating state gambling laws by offering its sporting event contracts without a license. Kalshi sought preliminary injunctions in both states to prevent them from enforcing state gambling laws.
Kalshi argued its contracts are swaps, not bets, and therefore fall under federal, rather than state, jurisdiction. Lower courts were split over the issue. The lower court in Tennessee found in Kalshi’s favor. An Ohio lower court sided with the state. The cases were subsequently heard by the Sixth Circuit Court of Appeals, which rendered its decision in favor of the states.
Kalshi’s sporting event contracts are often viewed as similar to sports bets. And their offering of "combos" allows customers to combine trades, replicating sportsbooks' parlays. Yet Kalshi argues the contracts constitute financial swaps, which are regulated by the Commodity Futures Trading Commission. Furthermore, it argues that as federally regulated contracts, they preempt state gambling laws. But that’s not how the Sixth Circuit viewed the case.
Enjoying Covers content? Add us as a preferred source on your Google account“We hold that Kalshi has not shown that its sports-event contracts satisfy the statutory definition of a 'swap' so as to fall within the scope of the CFTC’s 'exclusive jurisdiction,” reads the opinion from circuit judge Julia Smith Gibbons. “And, even assuming that Kalshi’s sports-event contracts are swaps, we alternatively hold that the CEA neither expressly nor impliedly preempts Ohio’s or Tennessee’s gambling laws.”
3 federal decisions down, 1 pending. Is the US Supreme Court next?
This is the second federal appeals court to rule against Kalshi. In last month’s prediction market news, the Ninth Circuit Court of Appeals overturned a lower court decision in Nevada, dissolving a previously granted preliminary injunction.
The decision by both the Sixth and Ninth Circuit Courts undermines the earlier decision by the Third Circuit Court of Appeals. In that case, the court held an overly broad interpretation of the definition of swaps and the powers granted to the CFTC following the 2008 financial crisis.
Meanwhile, the Fourth Circuit Court of Appeals is considering a similar appeal regarding a lower court ruling in Maryland. With a fourth federal court decision pending, it is more and more likely that the issue is heading to the U.S. Supreme Court.
New Jersey has already filed a petition for writ of certiorari to the Supreme Court earlier this month.
“We’re calling on the Supreme Court to resolve this issue and recognize that Congress did not silently make the sports-betting industry immune from state law,” said New Jersey Attorney General Jennifer Davenport.
Along with the federal results, there are still many state cases yet to be decided, which can be monitored on the prediction market legal tracker.
