Kalshi sports contracts ruling lets Ohio and Tennessee enforce gambling laws

The Kalshi sports contracts ruling from the Sixth Circuit lets Ohio and Tennessee apply their gambling laws to the prediction market’s sports offerings. In a unanimous September 25 decision, the three-judge panel affirmed an Ohio court’s refusal to block enforcement and removed a preliminary injunction that had protected Kalshi in Tennessee. The cases now return to the lower courts.

The decision is a setback for Kalshi’s argument that its federally regulated exchange places its event contracts solely under the Commodity Futures Trading Commission’s authority. It is not a nationwide finding that all prediction-market contracts are gambling, nor does it decide every state’s authority over every type of contract.

What did the Sixth Circuit decide about Kalshi’s sports contracts?

The court gave two independent reasons for its result. First, it found Kalshi had not demonstrated that its sports-event contracts meet the Commodity Exchange Act’s definition of a swap, the category over which the CFTC has exclusive jurisdiction. Second, the panel held that even if the contracts were swaps, the Commodity Exchange Act does not expressly or implicitly displace Ohio and Tennessee gambling laws.

Kalshi operates a designated contract market where users trade event contracts, derivatives whose payouts depend on specified events, occurrences or values. According to the court, the company began listing sports-event contracts in early 2025 after previously offering products tied to areas including climate, crypto, economics, politics and popular culture. Ohio and Tennessee regulators then indicated they planned enforcement action under their respective gambling laws, leading Kalshi to seek preliminary injunctions.

The underlying district courts had split. The Southern District of Ohio denied Kalshi interim relief, while the Middle District of Tennessee granted it. The appeals panel upheld the Ohio result, vacated the Tennessee injunction and remanded both matters for further proceedings. That procedural posture means the decision changes Kalshi’s ability to obtain preliminary protection in the two states; it does not conclude the litigation’s ultimate merits.

Why could the Supreme Court become involved?

The ruling adds to an appellate split over whether sports-related prediction-market contracts fall under state gambling regulation or exclusive federal derivatives oversight. Reuters reported that the Ninth Circuit allowed Nevada to apply its gambling laws to Kalshi’s contracts last month, while the Third Circuit ruled in April that New Jersey could not apply its gambling laws to the company’s contracts.

New Jersey has asked the Supreme Court to review the Third Circuit ruling. The Court has not said whether it will take the case. CNBC reported that the CFTC has separately sued nine states based on its view that the Commodity Exchange Act gives it exclusive authority over event contracts.

Kalshi said it disagreed with the Sixth Circuit’s decision and did not believe it would survive further review. Tennessee Attorney General Jonathan Skrmetti called the ruling a win for the state. Those reactions reflect the competing regulatory positions, while the controlling result for this litigation is narrower: Ohio and Tennessee may enforce their gambling laws against Kalshi’s sports contracts while the cases proceed.

This story draws on original reporting from Ars Technica.