The Sixth Circuit ruled against Kalshi in Ohio and Tennessee a month after another appeals court sided with Nevada. New Jersey still has a conflicting ruling. The question for a national market is now practical as well as legal: can an exchange offer the same sports contract across state lines when its federal registration does not necessarily protect it from state gambling law?
Summary
A three-judge Sixth Circuit panel ruled on Sept. 25 in two cases involving Ohio and Tennessee.
The ruling affirmed one denied injunction in Ohio and vacated one granted injunction in Tennessee.
Three federal appellate circuits have now addressed sports contracts, with the Third Circuit on the other side.
According to the opinion, Ohio and Tennessee each set 21 as the minimum age for sports wagering.
Kalshi self-certified sports contracts on Jan. 22, 2025; neither state has issued it a gaming license.
An Ohio resident wanting to buy a Kalshi contract on a basketball game faces a different legal position than a New Jersey resident purchasing the same contract. The exchange and the payoff can be identical. The state line is what changes. On Sept. 25, the federal appeals court covering Ohio and Tennessee concluded that Kalshi had not demonstrated that its sports products were shielded from the gambling laws of those states.
The 49-page Sixth Circuit opinion, in the consolidated cases KalshiEX LLC v. Schuler and KalshiEX LLC v. Orgel, outlines two separate reasons. Its three judges stated that Kalshi had not established that the sports contracts qualified as swaps under the Commodity Exchange Act. They then assumed, for the sake of argument, that the contracts were swaps, and still found that the federal statute did not displace the gambling rules of Ohio and Tennessee. One answer concerns the product, and the other concerns the boundary between two governments.
Neither ruling signifies a final nationwide ban on sports prediction markets. Both cases pertain to preliminary injunctions, meaning orders that would prevent state officials from enforcing their laws during litigation. The panel upheld Ohio’s denial, removed Tennessee’s protection for Kalshi, and sent both cases back to lower courts. Kalshi remains a federally registered exchange, but registration alone did not secure these specific motions.
Two states entered the appeal with opposing outcomes.
Kalshi registered as a designated contract market with the Commodity Futures Trading Commission in 2020. On Jan. 22, 2025, it self-certified sports event contracts and began listing them. The opinion describes markets covering tournament results, golf, soccer statistics, and combinations of player and game outcomes. A trader buys a yes or no position that pays based on the specified result. Kalshi had previously offered contracts on climate, economics, elections, and crypto. The September decision concerns sports.
Ohio’s Casino Control Commission cautioned Kalshi that it was offering sports products without a state license. The regulator raised its 21-year minimum and alleged that individuals below that age could access the exchange. These claims come from the commission’s allegations recorded in court, not an independent determination of underage customer trading. Kalshi asserted that its federal exchange status allowed it to offer contracts nationwide and sued to prevent enforcement, but an Ohio district judge denied a preliminary injunction.
Tennessee’s Sports Wagering Council issued its own cease-and-desist letter. Kalshi again sued, but a Tennessee district judge granted protection against state officials. The state appealed. In one federal circuit, the same legal theory yielded one order allowing enforcement and another restraining it. The appellate panel heard the cases together and resolved both on Sept. 25, affirming Ohio’s refusal and vacating Tennessee’s injunction.
The distinction between an injunction and the subsequent merits is important. The panel assessed whether Kalshi had demonstrated a likelihood of success adequate to halt the states now. The underlying suits have been remanded. An operator seeking guidance today cannot treat a ruling on temporary protection as a final trial judgment, yet a state that is no longer restrained can pursue its existing rules. A later appeal, rehearing, or Supreme Court decision could change the circumstances.
Kalshi spokesperson Dani Lever told Reuters that the company anticipates the ruling will undergo further review and argued that differing regulations at state borders undermine a national market. The company has a valid point: a single electronic order book runs smoother when eligibility for a contract does not shift based on each customer’s location. The appellate judges acknowledged that compliance could incur costs but did not view these costs as evidence that federal law prohibits state restrictions.
JUST IN: ESMA warns Polymarket and Kalshi lack authorization to generally serve EU users. The European Securities and Markets Authority (ESMA) indicated that event contracts could fall under EU securities rules, MiCA, or national gambling laws, while cautioning that a tech sell-off could impact crypto… pic.twitter.com/B1MLQfZxkh— crypto.news (@cryptodotnews) September 10, 2026
A sports wager does not convert into a swap merely because it is traded on an exchange.
The Commodity Exchange Act grants the CFTC exclusive jurisdiction over certain transactions, including swaps traded on designated contract markets. Its definition of a swap includes payments related to events or contingencies having potential financial, economic, or commercial consequences. Kalshi argues that its sports contracts satisfy this definition and that the exchange operates within the federal regulatory framework. If both assertions are correct, it contends, states cannot regulate the product as gambling.
The Sixth Circuit concentrated on the aftermath when the game concludes. A variation in interest rates or a debt default carries an economic consequence tied to the event. A tennis result could influence sponsorships, television revenues, or local businesses, but those effects depend on later decisions made by other parties. The panel deemed these effects too indirect to classify the sporting outcome as the kind of financial contingency envisioned by the swap definition. It evaluated the product’s terms, not just the federally registered venue where customers engage in trading.
JUST IN: Kalshi files with the CFTC for equity index perpetual futures. The products would enable leveraged long or short positions on major indexes pic.twitter.com/33F2cExZx9— crypto.news (@cryptodotnews) August 19, 2026
The opinion highlights a concern with defining every event that impacts someone’s finances as a swap. Under such a definition, an ordinary sportsbook wager could qualify simply because the customer gets paid if a team wins. Federal law imposes restrictions on where swaps can be traded. Applying this definition to every wager could encroach upon traditional sports betting, including bets made outside registered exchanges, within a framework Congress did not explicitly design for them. This consequence informed the judges’ interpretation of the statutory text; it was not a finding that all wagers necessarily violate federal law.
Kalshi has a compelling textual counterargument. Congress established a specific procedure for event contracts associated with gaming. Why would it create a mechanism for the federal agency to prohibit such contracts if it had no authority over them? The panel responded that the special rule applies to agreements, contracts, transactions, or swaps. Federal authority to review a gaming-related event product does not imply that every such product fits the narrower swap definition. A regulator can have power of review without possessing exclusive jurisdiction over every state-law aspect of the activity.
This is where the product’s designation loses its effectiveness. An event contract could be a derivative in general usage and still fail to meet the particular statutory test Kalshi cited for exclusive federal protection. This distinction clarifies why a CFTC filing or exchange listing serves as evidence of federal oversight without automatically resolving a separate state’s licensing issue. Crypto.news has previously explained how self-certification enables an exchange to list an event contract without requiring prior approval for every new market. That process is a step within the federal system. It does not equate to a court judgment that every listed market supersedes gambling laws.
Even a swap may encounter state gambling law.
The second holding makes the opinion more significant than simply a debate over definitions. The judges presumed that Kalshi could prevail on the swap argument and inquired whether the federal statute would subsequently obstruct Ohio and Tennessee. They still answered no. A higher court could dispute the classification and leave this separate conflict unresolved.
Federal preemption occurs in multiple forms. Congress can explicitly state that state law is superseded. State law may be invalidated when compliance with both systems is impractical. It may be displaced if it hinders the federal law’s intended purpose, or if Congress has addressed the whole regulatory area. The Sixth Circuit analyzed these avenues and concluded that Kalshi had not satisfied the requirements for any of them at this point.
Kalshi heavily leaned on the CFTC’s exclusive jurisdiction over swaps on federal exchanges. The panel interpreted that phrase as designating federal regulatory authority, rather than as an explicit nullification of every state rule that may apply to an exchange operator. Congress has clearly articulated preemption language in other commodities law contexts, the judges noted, including provisions regarding some state gaming rules and insurance. They found no analogous expansive command in the clause on which Kalshi relied.
The panel also referenced the special rule permitting the CFTC to evaluate event contracts involving activities that are unlawful under state law. This reference would be peculiar, they reasoned, if Congress intended to eliminate the relevance of state law entirely. Federal oversight and state gambling enforcement can coexist according to the panel’s interpretation. This understanding sharply contrasts with the argument stating that federal authorization itself guarantees nationwide access.
The result is more limited than asserting that states control all event contracts. The decision relates specifically to the sports wagering laws of Ohio and Tennessee as applied to Kalshi’s sports products. A weather contract, an election contract, and a Bitcoin price contract could raise dissimilar classification and regulatory issues. Courts have not established a universal rule applicable to all of them. Treating the September ruling as a blanket prohibition on prediction markets would erase the distinctions the judges made throughout the opinion.
The state border presents not only a legal issue but also an engineering challenge.
One part of the opinion tackles a nuance often overlooked in discussions of jurisdiction. Kalshi asserted that CFTC rules mandate impartial access to its exchange and that state-specific restrictions would make it impossible to comply with both federal and state laws. The Sixth Circuit scrutinized the rule itself. It stated that impartial access pertains to how an exchange treats eligible participants in the markets it provides; it does not require the exchange to offer every single market in every state.
The judges identified a practical alternative: limit access to certain contracts based on customer location. They noted that other firms have utilized geofencing while still providing eligible participants impartial access within the allowed area. Kalshi noted that this configuration can be technically challenging, lengthy, and costly. The panel agreed that implementation difficulties could arise but asserted that challenges do not render compliance impossible. It referenced Sporttrade as an example raised in the related New Jersey litigation.
To illustrate the operational implications, the exchange could choose to make a sports contract unavailable to an Ohio customer while offering a different contract to that customer and selling the sports contract to customers in other states. It would need to conduct location checks when opening accounts and placing orders, establish rules for open positions if a customer’s location changes, and implement measures to prevent restricted users from accessing the product via alternative channels. The opinion does not mandate this specific design or verify that any particular approach would meet state officials’ approval. The steps represent the practical implications of its conclusion that geography can be significant within a national electronic venue.
Another option would be to obtain a state gaming license where applicable. This would alter the product’s regulatory landscape. Ohio and Tennessee laws, as summarized by the court, specify a minimum age of 21 for sports customers and impose licensing, tax, and consumer protection obligations. Tennessee mandates that its sports customers be physically present in-state. A license also involves oversight by a regulator whose responsibilities differ from those of the CFTC. A company opting for this route would need to ascertain whether its existing exchange structure, customer base, and clearing arrangements could fulfill those requirements. The court did not compel Kalshi to apply for a license or determine that an application would be successful.
This illustrates a crucial aspect often overlooked in simplistic court scoreboard views. If an exchange geofences states where it cannot provide sports markets, liquidity on the national order book may shift even for users in compliant states. If it instead seeks multiple state approvals, trading eligibility and compliance costs may vary for its customer base. The premise of a single federal venue remains intact, but nationwide access to a specific product is no longer guaranteed based solely on that premise. Kalshi’s concerns about fragmentation extend beyond mere rhetoric. They highlight a tangible cost that the Sixth Circuit deemed legally acceptable.
New Jersey presents Kalshi with its strongest counterargument.
The federal appellate courts hold differing views. In April, a divided Third Circuit panel upheld a preliminary injunction protecting Kalshi from New Jersey enforcement. It determined that the sports contracts qualified as swaps on a CFTC-registered exchange and that Kalshi had demonstrated a reasonable chance of proving federal preemption. This serves as the strongest available judicial support for Kalshi’s position, rather than an isolated reference from a company filing.
The Third Circuit perceived the statute’s national market structure as intentional. Congress established a federal regulator and an exchange designation process specifically to prevent conflicting rules from interfering with trading in covered products. The court regarded New Jersey’s effort to prohibit specific sports contracts as an interference with federally regulated exchange trading. Its conclusion provided Kalshi with temporary protection while the New Jersey case is ongoing. However, it did not deliver a final verdict asserting that every sports market is exempt from all state laws.
The competing interpretation carries its own drawbacks. If a state can ban a federally listed contract by categorizing it as gambling, a national derivatives venue may encounter a patchwork of local regulations. The challenge then becomes how to differentiate between a state regulating gambling and a state indirectly affecting the substance of a federal derivatives market. Kalshi’s concern regarding uncertainty is most pronounced at that juncture, where the same trade could be lawful for one participant and unavailable for another.
In August, the Ninth Circuit allowed Nevada to enforce its gaming regulations during litigation. The Sixth Circuit has now delivered a ruling favorable to Ohio and Tennessee. This results in three appellate circuits, two outcomes, and no definitive nationwide standard. The Fourth Circuit currently has a related appeal pending in Maryland, according to the Sixth Circuit opinion. Predicting that the division will inevitably lead to the Supreme Court would overstate the evidence. A petition, an order granting review, and a merits decision are distinct events.
The record also warns against interpreting judicial disagreement as evidence that one party is acting outside the law in bad faith. Judges interpreting the same federal provisions have arrived at opposing conclusions at the injunction stage. State authorities are applying their sports wagering statutes, while Kalshi is invoking its federal registration and its interpretation of Congress’s jurisdictional grant. The legal contest lies in the interplay of those authorities.
The federal regulator cannot resolve this matter single-handedly.
The CFTC has its interests in event markets. It participated in the Ohio appeal as an amicus, as documented in the Sixth Circuit’s counsel listing, and it has suggested changes to its review process for contracts involving gaming and other activities. The agency has the authority to set exchange standards and evaluate listed products as determined by Congress. A final rule cannot, autonomously, revise the provisions of the Commodity Exchange Act that the appellate judges disagreed upon.
Crypto.news’ analysis of the CFTC’s event contract proposal illustrates a separate regulatory pathway, while its report on the Ninth Circuit’s decision clarifies why a court defeat does not necessarily nullify a proposal. The agency’s power to oversee an exchange and a state’s authority to enforce a gambling statute can coexist under the Sixth Circuit’s interpretation. A rule indicating that the CFTC will review a product doesn’t itself settle that constitutional and statutory relationship.
Congress could modify the underlying statute by more clearly defining sports event contracts, specifying the extent of federal jurisdiction, or expressly preserving a role for state gambling law. None of these alternatives were included in the Sept. 25 opinion. A legislative resolution would require textual amendments, voting, and enactment. Until then, litigation and decisions about product access are accomplishing tasks that a uniform statutory resolution would typically address.
Sports leagues, data providers, and partners have their own interests to consider. The NFL requested the CFTC to tighten safeguards in the proposed event contract regulations, according to crypto.news’ report on its input. The league’s integrity concerns are unrelated to whether a contract is legally a swap. A more robust federal integrity standard might address one issue without resolving the dispute over state authority. Conversely, a court victory regarding federal jurisdiction would not imply that a market is free from federal product oversight.
An injunction is temporary, and users need jurisdiction.
The Sept. 25 judgment shifts which side holds temporary protection in the two Sixth Circuit cases. It does not clarify that a specific customer’s position will be invalidated, that an account will be deactivated, or that a specific state has completed a new enforcement action. These outcomes depend on the state, the product, the procedural next step, and the platform’s response. Legal exposure should be described in this context.
Furthermore, the decision does not establish how courts will categorize markets whose payouts rely on financial data, election outcomes, or weather. The court focused on sports contests and the applicable state laws regarding sports wagering. A platform presenting various market categories may require a different legal assessment for each. This distinction also matters for the CFTC’s review of what an exchange self-certifies. A federal designation attaches to the venue, while the legal nature of a specific contract may still be contested.
The difference between the circuit rulings is concrete today. Kalshi enjoys appellate support in New Jersey but lacks comparable protection from Ohio and Tennessee under the ruling from Friday. Nevada has delivered an appellate outcome favorable to its regulator. Readers should resist interpreting this map as providing answers for all 50 states. Appeals in different jurisdictions, decisions regarding state licensing, and new orders could modify access. Crypto.news previously mapped the state litigation; this new Sixth Circuit ruling alters two key entries on that map.
The challenge for Kalshi’s national model is determining whether one federal exchange can incorporate local exclusions without forfeiting the benefits of a shared market. The Sixth Circuit maintains that this is legally feasible based on the arguments submitted. Kalshi contends that it results in a costly patchwork that Congress intended to avoid. The Third Circuit concurs with much of the company’s legal reasoning. Future filings will reveal if this divergence leads to higher review or continues to be managed state by state and injunction by injunction.
What to watch
- Kalshi’s next filing. A request for rehearing or Supreme Court review would clarify which of the Sixth Circuit’s two independent findings the company is challenging.
- Ohio and Tennessee enforcement. New notices or orders would indicate how the states utilize their restored ability to implement sports wagering regulations.
- Changes in customer eligibility. Geofencing or modifications to age rules would illustrate how Kalshi adapts operationally while the cases are ongoing.
- The Maryland appeal. A Fourth Circuit ruling could shift the appellate landscape and sharpen or narrow the existing disagreement.
- CFTC rulemaking. A finalized event contract rule may modify federal scrutiny, yet it cannot solely resolve the courts’ statutory disagreement.
FAQ
What did the Sixth Circuit decide about Kalshi on Sept. 25?
It rejected Kalshi’s requests for preliminary protection in cases involving Ohio and Tennessee. The three-judge panel upheld the denial of an injunction in Ohio, vacated the injunction in Tennessee, and remanded both cases to lower courts.
Did the court ban Kalshi in every state?
No. The decision pertains strictly to sports event contracts and enforcement by Ohio and Tennessee. It constitutes an appellate ruling on preliminary injunctions, not a conclusive nationwide judgment on every product Kalshi offers.
Did the judges find that sports contracts are swaps?
No. They concluded that Kalshi had not established that these sports contracts satisfy the statutory swap definition. They also presumed, as part of a separate legal argument, that the contracts were swaps and found no sufficient basis for displacing the gambling laws of the two states.
Why does Kalshi argue that state rules should not apply?
Kalshi is a CFTC-registered designated contract market, arguing that the federal Commodity Exchange Act grants the CFTC exclusive jurisdiction over relevant exchange-traded contracts. The Third Circuit acknowledged enough of this argument to provide Kalshi with temporary protection in New Jersey.
What does the Third Circuit ruling imply now?
The ruling from April maintained a preliminary injunction against New Jersey enforcement of the sports contracts at issue. It conflicts with the Sixth Circuit’s Sept. 25 reasoning, but neither decision constitutes a final nationwide ruling on the merits.
Can Kalshi restrict sports markets by state?
The Sixth Circuit stated that geofencing could allow compliance with both the federal exchange’s impartial-access obligation and state requirements. It did not endorse a specific geofencing design or mandate Kalshi to implement one.
Are prediction markets equivalent to sports betting under this ruling?
The judges examined Kalshi’s sports event contracts and the specific gambling regulations of Ohio and Tennessee. They did not conclude that every market related to elections, weather, cryptocurrency prices, or other topics constitutes sports betting.
Will the Supreme Court take the case?
The conflicting appellate decisions make further review possible, but no Supreme Court ruling follows automatically. Petitioning and obtaining review are separate processes. This analysis serves educational purposes and is not investment advice.
Disclaimer: This article is intended for informational and educational purposes only and does not constitute financial or investment advice. Figures are based on regulatory filings and reports available at the time of writing and are subject to change with each disclosure. Nothing herein is a recommendation to purchase, sell, or hold any security or asset. Always conduct your own research. Information is accurate as of September 26, 2026.
