Sixth Circuit lets Ohio and Tennessee enforce gambling laws against Kalshi

A unanimous three-judge panel of the Sixth U.S. Circuit Court of Appeals ruled Friday that Ohio and Tennessee may enforce their gambling laws against Kalshi’s sports-event contracts, rejecting the prediction-market operator’s argument that the Commodity Futures Trading Commission has exclusive authority over them.

The court affirmed an Ohio federal judge’s denial of Kalshi’s request for a preliminary injunction and vacated a Tennessee judge’s injunction that had barred state enforcement. The cases, KalshiEX LLC v. Schuler and KalshiEX LLC v. Orgel, were returned to the lower courts for further proceedings.

Senior Judge Julia Smith Gibbons, joined by Judges Eric L. Clay and Rachel S. Bloomekatz, concluded that Kalshi had not shown its contracts met the statutory definition of a swap. The relevant Dodd-Frank provision covers payment arrangements dependent on an event associated with a potential financial, economic or commercial consequence.

Sports outcomes are events, the court found, but Kalshi’s contracts do not depend on events with the required kind of consequence. Gibbons wrote that, unlike contracts based on financial values or instruments, sports-event contracts have only “downstream economic consequences,” if they have any economic consequences at all.

The panel also gave an alternative ground for its decision. Even if the contracts were swaps, it held, the Commodity Exchange Act neither expressly nor impliedly pre-empts Ohio’s and Tennessee’s gambling laws.

That ruling reverses the outcome Kalshi had won in Tennessee, where a district court had found it likely to succeed on its position that the contracts were swaps and that conflict pre-emption applied. It leaves standing the opposite Ohio decision, which had found that Kalshi had not established that the contracts were swaps and that state law would not be pre-empted in any event.

Kalshi has been registered as a CFTC-designated contract market since 2020. It began self-certifying and listing sports-event contracts on Jan. 22, 2025, after offering contracts tied to subjects including climate, crypto, economics, politics and popular culture.

Ohio and Tennessee moved to apply their sports-wagering regimes after Kalshi introduced the products. Both states permit sports gambling but impose licensing, tax, consumer-protection, age and location rules. Each requires bettors to be at least 21; Ohio requires wagers to be initiated, received and completed in the state, while Tennessee requires online bettors to be physically located there.

The judgment adds to a widening appellate split over whether federally regulated prediction-market contracts can be subject to state gaming rules. As we reported in August, the Ninth Circuit held that Nevada could enforce its gaming regulations against Kalshi, finding the sports contracts were bets rather than swaps.

The Third Circuit reached the opposite conclusion in April, holding that Kalshi’s sports-related contracts were swaps and that the Commodity Exchange Act pre-empted New Jersey’s gambling laws. Its majority reasoned that sports outcomes can have economic consequences for sponsors, broadcasters, franchises and communities. New Jersey filed a Supreme Court petition seeking review on Sept. 2.

The Sixth Circuit’s decision follows a more restrictive reading of the swap definition. It said accepting Kalshi’s position would place event contracts with no relationship to Congress’s intended regulatory goals within the CFTC’s authority. The CFTC’s jurisdiction under the Commodity Exchange Act is exclusive for swaps traded or executed on designated contract markets, while Dodd-Frank separately permits the agency to prohibit certain event contracts, including those involving gaming.

The dispute has become significant for states whose regulated sports-betting systems generate tax revenue and enforce local consumer safeguards. Sports-gambling tax receipts exceeded $3.2 billion in fiscal 2025, according to the Sixth Circuit opinion. The CFTC has separately sued nine states to defend what it considers its exclusive authority over event contracts.