Kalshi loses appeal over Ohio and Tennessee sports betting laws, widening circuit split

A federal appeals court ruled on Friday that Ohio and Tennessee can enforce their sports gambling laws against Kalshi, rejecting the prediction markets platform's argument that federal commodities law shields its sports event contracts and overrides the authority of the states.

A three-judge panel of the U.S. Court of Appeals for the Sixth Circuit unanimously held that Kalshi has not shown those contracts meet the legal definition of a "swap." The Commodity Futures Trading Commission (CFTC) has "exclusive jurisdiction" over swaps traded on designated contract markets such as Kalshi.

The panel also ruled that even if the contracts were swaps, the Commodity Exchange Act would not preempt either state's gambling laws.

The court upheld Chief Judge Sarah D. Morrison's March ruling denying Kalshi a preliminary injunction in Ohio. It vacated the injunction Judge Aleta A. Trauger granted Kalshi in Tennessee in February and returned that case to the district court.

Kalshi began listing sports event contracts in January 2025. The Ohio Casino Control Commission ordered it to stop offering them in the state without a license, and Kalshi sued.

Tennessee's Sports Wagering Council issued its own order in January, naming Polymarket and Crypto.com's Nadex alongside Kalshi. Kalshi sued and won a temporary restraining order days later.

Defining a swap

At issue was a Dodd-Frank provision that defines a swap to include contracts tied to an event "associated with a potential financial, economic, or commercial consequence."

The court read that phrase to cover only events inherently tied to a financial consequence, such as a rise in interest rates or a debt default. The downstream effects of a sports game on sponsors, advertisers and local businesses are "too attenuated, indirect, and speculative" to count, it said. The panel was equally unconvinced by Kalshi's mention markets, which let users trade on whether a word will be said on air.

"There is no conceivable reason why the market might need to know the probability that a broadcaster says a random word on air," Judge Julia Smith Gibbons wrote for the panel.

The opinion noted that Kalshi had conceded in earlier litigation that its sports event contracts have "no inherent economic significance."

Because federal law requires swaps to trade on regulated exchanges, the court said Kalshi's reading would "attach criminal penalties to a breathtaking amount of commonplace [gambling] activity." That would include "every sports wager placed in a casino, on an online sports book, or between two friends at a bar," the court wrote, quoting an amicus brief from former CFTC Chair Gary Gensler.

On preemption, the panel found that Ohio and Tennessee's laws regulate sports betting and only incidentally affect exchanges like Kalshi.

Kalshi spokesperson Dani Lever told Courthouse News that the company disagreed with the ruling.

"The law does not require a swap to involve 'intrinsic' financial consequences — and even if it did, sports clearly do," Lever said.

Lever said the decision showed "exactly why a state-by-state patchwork doesn't work."

"Markets can't operate when the rules change at every state line, which is why Congress created a single federal regulator with nationwide rules," Lever said.

Circuit split leaves Kalshi 1-for-3

The Ninth Circuit ruled against Kalshi in a Nevada case on Aug. 28. In April, the Third Circuit sided with Kalshi 2-1 against New Jersey.

Kalshi's legal battles may be headed to the Supreme Court. New Jersey Attorney General Jennifer Davenport asked the U.S. Supreme Court on Sept. 2 to review that decision. Kalshi's appeal in a Maryland case is still pending before the Fourth Circuit, according to Friday's opinion.

The CFTC, which under Chair Michael Selig (who is also the typically bipartisan commission's sole member) has claimed exclusive authority over prediction markets, filed an amicus brief backing Kalshi in the Ohio appeal in May.

More than a dozen states have taken enforcement action or filed lawsuits against Kalshi over its sports contracts, including Connecticut and Michigan.

Kalshi recorded $38.67 billion in trading volume in August, according to The Block's data dashboard.

Kalshi did not immediately respond to The Block's request for comment.