Sixth Circuit Rejects Kalshi Claim That Federal Commodities Law Preempts Ohio and Tennessee Gambling Rules on Sports Contracts
The Sixth Circuit held Kalshi’s sports prediction contracts are not swaps under the CEA, allowing Ohio and Tennessee to apply gambling laws. It affirmed Ohio’s injunction denial and vacated Tennessee’s grant. The ruling widens a circuit split with the Third Circuit, raising prospects for Supreme Court resolution.
SCCG Take — State regulators gain leverage to treat sports prediction products as wagering. Operators face heightened compliance burdens and legal uncertainty until national clarity emerges from Congress or the Supreme Court.
The U.S. Court of Appeals for the Sixth Circuit has ruled that Kalshi cannot invoke the Commodity Exchange Act to block Ohio and Tennessee from applying state gambling laws to its sports-related prediction market contracts. The unanimous decision affirms the Southern District of Ohio’s denial of a preliminary injunction sought by Kalshi and vacates a contrary grant of injunctive relief from the Middle District of Tennessee. The cases return to those district courts for further proceedings.
Circuit Judge Julia Smith Gibbons wrote the opinion, joined by Judges Eric L. Clay and Rachel S. Bloomekatz. The panel concluded that Kalshi failed to show its sports event contracts qualify as swaps under the Commodity Exchange Act. Traditional swaps typically serve financial or commercial risk-management purposes, such as hedging fuel costs for an airline. The court determined Kalshi’s contracts tied to soccer corner kicks and multi-leg sports parlays lack comparable economic or commercial consequences.
The Court’s Assessment of Kalshi’s Federal Preemption Argument
Kalshi operates as a federally registered designated contract market supervised by the CFTC. It argued that classification of its sports contracts as swaps would place them under exclusive federal authority, preventing state enforcement of gambling restrictions. The Sixth Circuit disagreed, noting Kalshi’s own prior statements that certain event contracts possess “no inherent economic significance.” That language undercut the company’s effort to secure the same treatment afforded traditional risk-management products. The ruling gives Ohio and Tennessee stronger footing to treat sports-focused prediction contracts as subject to state gambling laws while litigation continues.
Circuit Split and Next Steps in the Dispute
The decision deepens a circuit split. The Third Circuit, in a New Jersey matter earlier in 2026, accepted a version of Kalshi’s swap argument and found federal law displaced certain state limits. As reported by SportsHandle, the conflicting appellate views on Commodity Exchange Act preemption of state gambling rules heighten the prospect of Supreme Court review, though the Court is not obligated to take the case. Kalshi has stated it disagrees with the Sixth Circuit’s ruling and anticipates it will not survive further scrutiny. For now the opinion stands at the preliminary-injunction stage and leaves prediction-market operators exposed to differing state rules on sports contracts absent clearer national guidance.
Reporting: SportsHandle
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