Sixth Circuit Rules Ohio and Tennessee Can Regulate Kalshi's Sports Event Contracts, Deepening Circuit Split

The 6th U.S. Circuit Court of Appeals ruled unanimously on Friday, September 25, 2026, that Ohio and Tennessee may apply their state gambling laws to Kalshi's sports-related event contracts, rejecting the prediction-market operator's argument that the Commodity Futures Trading Commission (CFTC) holds exclusive jurisdiction over the products, according to CNBC and the New York Post. The decision marks the second appellate defeat for the fast-growing prediction-market industry in a matter of weeks and sharpens a split among federal circuits that is now headed toward the Supreme Court.

What the Court Decided

A three-judge panel based in Cincinnati, writing through Circuit Judge Julia Smith Gibbons, held that Kalshi failed to demonstrate its sports event contracts meet the statutory definition of a "swap" that would place them under the CFTC's exclusive purview, per the opinion cited by Reuters via WTVB. The panel added an alternative holding: even assuming the contracts qualify as swaps, the Commodity Exchange Act neither expressly nor impliedly preempts Ohio's or Tennessee's gambling statutes. The ruling reverses a Tennessee federal district court decision that had previously sided with Kalshi and affirms an Ohio district court ruling that had gone the other way, according to CNBC's reporting.

Tennessee Attorney General Jonathan Skrmetti characterized the outcome as a rejection of the company's regulatory strategy, saying Kalshi "attempted an end run around Tennessee law to avoid any of the rules or taxes associated with sports gambling. They failed," per CNBC.

A Second Loss, and a Widening Split

The Sixth Circuit's decision follows a similar ruling last month from the 9th U.S. Circuit Court of Appeals, which found 3-0 that Nevada can regulate Kalshi's sports event contracts because they are, in substance, sports bets rather than swaps. That panel wrote that "the substance of the sports event contracts offered on Kalshi's [exchange] is sports gambling, regardless of whether Kalshi calls them swaps," and called the company's efforts to distinguish the products from sportsbook wagers "unpersuasive," according to KCRA. Nevada Gaming Control Board chair Mike Dreitzer said that ruling "completely vindicates what we have been saying all along."

The two rulings stand in direct tension with an April decision from the Philadelphia-based 3rd U.S. Circuit Court of Appeals, which upheld in a 2-1 vote a lower-court block on New Jersey's enforcement efforts and held that the CFTC has the exclusive right to regulate all swaps, no matter the contract type, per CNN and CNBC. New Jersey asked the Supreme Court on Sept. 2 to shut down prediction markets in the state, with Attorney General Jennifer Davenport saying the state is "calling on the Supreme Court to resolve this issue and recognize that Congress did not silently make the sports-betting industry immune from state law," per CNN. It remains unclear, per CNBC, whether the justices will take up the case now or wait for additional circuit rulings. Interpretation: with three circuits now on record and conflicting outcomes, the Sixth Circuit's decision strengthens the argument that the split is ripe for Supreme Court resolution, though the court has given no indication of timing.

Company and Regulator Reaction

Neither Kalshi nor the CFTC immediately responded to requests for comment on Friday's ruling, according to both CNBC and WTVB's Reuters report. The company's most recent public position, articulated after the Ninth Circuit loss, was that it still believes "CFTC regulations as written do not prohibit sports contracts," and that it would "be seeking further review," per a statement from spokeswoman Dani Lever cited by KCRA. Kalshi has separately argued it is "an open, nationwide financial exchange" that "cannot be regulated by 50 different regulators," per Lever's comments to CNN. CFTC Chairman Mike Selig, a Trump appointee, has championed prediction markets and said his agency has exclusive jurisdiction over them, per CNN; the CFTC has sued nine states to defend what it believes is its exclusive right to regulate event contracts under the Commodity Exchange Act, according to CNBC, and the agency proposed new federal rules in June that would leave most of the industry intact, including most sports markets, per CNN.

Mounting State Actions

The ruling lands amid a broader legal offensive. As of early September, regulators in Nevada, Michigan and Washington had already secured court orders shutting down Kalshi's sports-related offerings, per CNN. A bipartisan coalition of 44 states has argued the platforms amount to unlicensed sportsbooks that skirt consumer protections and tax revenue, and Kalshi is currently contending with more than a dozen state lawsuits plus three tribal lawsuits seeking its removal from tribal land, according to the New York Post. The Post also noted the decision could push prediction-market operators toward broader compliance with state gaming regulators and could pave the way for outright bans on sports-related contracts in states such as California that do not permit sports wagering. Trading volume tied to the outcome is substantial: Kalshi and rival Polymarket now see billions of dollars in weekly volume, mostly from sports markets, per CNN and KCRA. Venture investors have continued backing Kalshi despite the legal pressure, with the company having raised $2.6 billion to date and reportedly in talks for financing that could value it near $40 billion, the Post reported.

Bottom Line

The Sixth Circuit's unanimous ruling gives Ohio and Tennessee legal footing to apply state gambling law to Kalshi's sports contracts and hands prediction-market operators their second appellate loss in as many months, per CNBC. With the Third Circuit having ruled the opposite way in the New Jersey case and a Supreme Court petition pending, the question of whether states or the CFTC ultimately control this market appears, in our reading of the rulings, more likely to be resolved by the justices than in the circuits — though CNBC notes it is not clear whether the Supreme Court will take the case now or await further circuit decisions. Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment, and CNN has a partnership with Kalshi under which it uses the platform's data, according to those outlets.