Kalshi loses court fight as states win power to regulate sports prediction markets

The 6th U.S. Circuit Court of Appeals ruled on September 25, 2026 that states can apply local gambling laws to Kalshi's sports prediction contracts. The unanimous panel rejected Kalshi's argument that its contracts are federally regulated swaps, clearing the way for Ohio and Tennessee to enforce licensing, age limits, and tax rules. This decision deepens a federal circuit split, increasing pressure on the U.S. Supreme Court to resolve the jurisdictional battle.

Court ruling on state preemption

• ▪The 6th U.S. Circuit Court of Appeals ruling on September 25, 2026 upheld an Ohio federal court decision favoring the state and reversed a Tennessee federal court decision that had backed Kalshi
• ▪The 6th U.S. Circuit Court of Appeals ruled that even if Kalshi's sports contracts were swaps, the Commodity Exchange Act does not expressly or impliedly preempt Ohio's or Tennessee's gambling laws
• ▪A unanimous three-judge panel of the 6th U.S. Circuit Court of Appeals ruled on September 25, 2026 that states can apply local gambling laws to Kalshi's sports event contracts

Dispute over swap classification

• ▪The 6th U.S. Circuit Court of Appeals rejected examples of a Spanish soccer club and a bar hedging risks cited by an industry group backing Kalshi, calling them isolated examples that do not establish sports contracts as inherently financial
• ▪The 6th U.S. Circuit Court of Appeals ruled that Kalshi's sports contracts do not meet the statutory definition of a swap because sports results are not inherently associated with a financial, economic, or commercial consequence
• ▪Kalshi and other prediction websites argued that their sports-event contracts are swaps regulated exclusively by the Commodity Futures Trading Commission, which preempts state-level gambling regulations

State regulatory actions against Kalshi

• ▪The Ohio Casino Control Commission sent Kalshi a cease-and-desist letter to stop offering sports wagering products without a license, accusing it of making them available to individuals under Ohio's legal gambling age of 21
• ▪Tennessee Attorney General Jonathan Skrmetti accused Kalshi of attempting to bypass state betting rules and taxes, stating that sports wagering is heavily regulated to prevent harm

National circuit split on jurisdiction

• ▪The 6th U.S. Circuit Court of Appeals ruling on Kalshi's sports contracts, issued September 25, 2026, deepens a circuit split, joining the 9th Circuit in siding with states, while the 3rd Circuit previously ruled that the CFTC had jurisdiction
• ▪New Jersey has petitioned the U.S. Supreme Court to review the 3rd Circuit's decision regarding prediction market jurisdiction

Debatable claims

• ▪Allowing 18-year-olds to trade on prediction markets poses unacceptable public risks
• ▪The federal government should have exclusive regulatory authority over sports prediction markets
• ▪Prediction markets compete unfairly with traditional state-regulated sports betting platforms