Kalshi loses appeal as Sixth Circuit backs Ohio and Tennessee
A federal appeals court has ruled Kalshi's sports event contracts are not swaps, clearing the way for Ohio and Tennessee to enforce their gambling laws against the exchange.
The Sixth Circuit Court of Appeals has ruled against Kalshi, finding that its sports event contracts do not qualify as swaps under federal commodities law and cannot shield the company from state sports betting rules, according to SBC Americas.
The unanimous panel, combining separate cases brought by Ohio and Tennessee regulators, upheld a Southern District of Ohio decision that had already denied Kalshi a preliminary injunction. It also threw out a Middle District of Tennessee order that had previously stopped Tennessee from enforcing its own rules against the exchange.
It is the second time an appeals court has rejected Kalshi's argument that federal law preempts state gambling regulation. The Ninth Circuit reached the same conclusion in a Nevada case in August. The Third Circuit, however, ruled the opposite way in April in a dispute involving New Jersey, setting up a direct conflict between circuits.
Kalshi had argued that its sports contracts are swaps traded on a market regulated by the Commodity Futures Trading Commission, giving the CFTC exclusive jurisdiction under the Commodity Exchange Act and blocking states from applying their own sports betting statutes.
Writing for the panel, Judge Julia Smith Gibbons said Kalshi failed to show its contracts meet the legal definition of a swap. A qualifying product, she wrote, must be tied directly to a financial, economic or commercial consequence, not merely produce knock-on effects for leagues, broadcasters, sponsors or local businesses.
According to SBC Americas, the court held that any economic impact from Kalshi's products was indirect at best, pointing to contracts built around things such as corner kicks, mentions by broadcasters and individual player statistics as examples lacking a genuine financial stake.
The judges also warned that accepting Kalshi's reasoning would have implications well beyond the company itself, since it would effectively reclassify ordinary bets placed at casinos and sportsbooks as unlicensed swaps, something the Commodity Exchange Act does not permit.
In Ohio, the case followed a cease-and-desist notice from the Ohio Casino Control Commission, which accused Kalshi of offering unlicensed sports gaming, including to people under 21, and separately pursued a $5 million fine. In Tennessee, the Sports Wagering Council issued its own cease-and-desist letter earlier in 2026, after which a district court had initially sided with Kalshi before Friday's reversal.
The ruling widens the gap between circuits on the question, with New Jersey already asking the Supreme Court to review the Third Circuit's decision in its favour, and Crypto.com and Robinhood separately pushing for the justices to settle the broader dispute over sports event contracts nationally.
A further appeal remains pending in the Fourth Circuit, but with two circuits now backing state enforcement against one favouring Kalshi's federal preemption theory, legal observers cited by SBC Americas suggest the Supreme Court will find the split increasingly hard to avoid taking up.