Sixth Circuit Holds Kalshi Sports-Event Contracts Fall Outside CEA Swap Definition as Brazil Bans Licensed Online Betting

Two major regulatory actions reshaped parts of the sports betting and prediction markets sector. The Sixth Circuit ruled that Kalshi’s sports-event contracts are not swaps under the Commodity Exchange Act, removing them from exclusive CFTC jurisdiction and reinforcing state gambling authority. Separately, Brazil enacted an immediate ban on all sports betting and online casinos less than two years after launching its regulated market.

Sixth Circuit Rejects Kalshi Swap Classification and Preemption Claims

The consolidated appeal resolved conflicting lower court outcomes. The Sixth Circuit affirmed Ohio’s denial of a preliminary injunction against state officials and vacated Tennessee’s grant of one.

“For the foregoing reasons, we hold that Kalshi’s sports-event contracts do not constitute swaps as defined in the CEA and thus do not fall within the scope of the CFTC’s exclusive jurisdiction,” the court said. It rejected any strict distinction between an event and its outcome, noting “It would be reasonable to describe the Giants winning the Super Bowl as both an occurrence and an outcome.”

The panel determined sporting events lack the intrinsic financial, economic or commercial consequences demanded by the CEA. It further held that even if the contracts qualified as swaps, the CEA would not preempt state gaming laws: “We thus conclude that conflict preemption does not block the States’ gaming laws.” According to reporting by Gambling Insider, the ruling aligns the Sixth Circuit with the Ninth on the ultimate outcome but diverges on aspects of the reasoning. Kalshi now holds losses in both the Sixth and Ninth Circuits after a favorable Third Circuit result in New Jersey.

Brazil’s Immediate Ban Exposes Licensed Market to Sudden Reversal

Luiz Inácio Lula da Silva signed a provisional measure banning sports betting and online casinos. The ban took effect at once, though Congress must approve it within 120 days for it to remain in force. Bettors must withdraw available funds by Oct. 5, with deposits already halted and existing licenses set to terminate after a 30-day transition period.

Lula cited household debt and public health concerns. Recent polls indicated around 75% of Brazilians support the prohibition. The move arrives one week before the Oct. 4 presidential election, where Lula seeks reelection against Sen. Flávio Bolsonaro, who has described it as politically motivated. The regulated market had launched in 2025 and rapidly ranked among the world’s largest betting jurisdictions. Entain stated the decision could significantly affect its net gaming revenue.

Signals for Licensed Operators Facing Appellate and Sovereign Risk

The Sixth Circuit decision narrows the federal pathway for prediction market contracts and invites renewed state-level enforcement in Ohio and Tennessee. Brazil’s reversal after barely one full year of licensed operations demonstrates that formal regulatory frameworks can be upended by executive action tied to electoral cycles. Operators and investors should track the CFTC’s expected event-contract rulemaking within the next two months and Brazil’s congressional review for clearer indicators of durable market access.

Reporting: Gambling Insider

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