News · September 26, 2026, 16:22 UTC
A federal appeals court has ruled that states may regulate sports-related event contracts offered by prediction market platform Kalshi. The decision, issued Friday, September 25, 2026, by a three-judge panel of the Sixth U.S.
Circuit Court of Appeals, concerns challenges brought by Kalshi over regulatory efforts in Ohio and Tennessee. The full opinion was not available; details are unconfirmed.
The decision is the second time a federal court of appeals has held that states have a role in regulating prediction markets’ sports offerings. The question of who can regulate these contracts is widely expected to reach the U.S. Supreme Court.
What happened
The Sixth Circuit panel ruled unanimously that Ohio and Tennessee are permitted to apply their state gambling laws to Kalshi’s sports-related event contracts.
The opinion stated that Kalshi had not shown its sports-event contracts meet the statutory definition of a “swap” so as to fall within the Commodity Futures Trading Commission’s “exclusive jurisdiction.”
The panel found Kalshi’s sports event contracts are not “swaps” and that, even if they were, the Commodity Exchange Act does not preempt state sports betting laws. Senior U.S.
Circuit Judge Julia Smith Gibbons wrote that for an event to be associated with a potential financial, economic or commercial consequence, it must be intrinsically associated with a financial consequence. The panel said Kalshi’s sports event contracts have only downstream economic consequences.
Judges Eric Clay and Rachel Bloomekatz joined Gibbons on the panel.
The ruling overturns a Tennessee federal district court decision that sided with Kalshi and reaffirms an Ohio federal district court decision that sided with the states.
Tennessee Attorney General Jonathan Skrmetti said Kalshi “attempted an end run around Tennessee law to avoid any of the rules or taxes associated with sports gambling,” and that the state thwarted efforts to “remove every safeguard.”
Kalshi spokesperson Dani Lever said the platform disagreed with the decision. She said the ruling “shows exactly why a state-by-state patchwork doesn’t work,” adding that courts disagree on whether federal law covers these contracts.
Lever also said that the law does not require a swap to involve “intrinsic” financial consequences and that sports clearly do. The CFTC did not immediately respond to a request for comment, and the Ohio and Tennessee attorneys general’s offices did not immediately respond to requests for comment.
Analysis: Why it matters for investors
The Sixth Circuit decision means prediction market platforms have now recorded two losses at the appeals court level. The Ninth U.S. Circuit Court of Appeals ruled last month that Nevada has a right to regulate sports-related event contracts, stating they were sports bets.
That divide among circuits could increase uncertainty for platforms whose business models depend on a single federal regulatory framework, though any financial impact has not been quantified.
For market participants, the rulings may signal that the legal treatment of sports event contracts could vary by state unless the Supreme Court resolves the question. Such a high court review is widely expected.
No timetable for further appeals or any potential financial exposure for Kalshi or other platforms has been disclosed.
Who is affected
The immediate parties are Kalshi, the CFTC, and the states of Ohio and Tennessee. The CFTC has sued nine states to defend what it believes is its exclusive right to regulate event contracts under the Commodity Exchange Act, and the Sixth Circuit panel rejected that notion.
Kalshi began offering event contracts based on sporting events last year, prompting state regulators to move to regulate the platform under state sports betting laws.
Other prediction market platforms face similar disputes, as states sue platforms over alleged illegal gambling operations while exchanges sue states to block enforcement of local laws. Additional platforms beyond Kalshi have not been named.
What is still uncertain
It is not clear whether Kalshi will seek further review, such as an en banc hearing or a Supreme Court petition. The CFTC’s next steps were not disclosed; the agency did not immediately respond to a request for comment.
The Ohio attorney general’s office and the Tennessee attorney general’s office did not immediately respond to requests for comment.
Details on how the ruling might affect Kalshi’s operations in Ohio and Tennessee have not been provided, nor have any compliance costs or revenue figures. The timing and scope of any Supreme Court consideration remain undisclosed.
Conclusion: What to watch next
The question of who can regulate prediction markets’ sports contracts is widely expected to be heard at the U.S. Supreme Court. Until then, the split between the Sixth and Ninth Circuits may leave platforms facing a state-by-state regulatory patchwork, as Kalshi’s spokesperson argued.
Investors and market watchers may focus on whether the CFTC, Kalshi, or the states seek further appellate review, and on how other circuits rule in similar disputes. It has not been disclosed when any of those developments might occur.
Frequently Asked Questions
What did the Sixth Circuit rule about Kalshi’s sports event contracts?
The Sixth U.S. Circuit Court of Appeals ruled that Ohio and Tennessee can apply their state gambling laws to Kalshi’s sports-related event contracts. The panel found the contracts are not “swaps” under the Commodity Exchange Act and that the act does not preempt state sports betting laws.
Why is this ruling significant for prediction markets?
It is the second decision by a federal court of appeals holding that states have a role in regulating prediction markets’ sports offerings. The Ninth Circuit ruled last month that Nevada has a right to regulate sports-related event contracts.
What did Kalshi and Tennessee officials say about the decision?
Kalshi spokesperson Dani Lever said the platform disagreed and that the ruling shows a state-by-state patchwork doesn’t work. Tennessee Attorney General Jonathan Skrmetti said Kalshi attempted an end run around Tennessee law.
What is the CFTC’s position in these disputes?
The CFTC has sued nine states to defend what it believes is its exclusive right to regulate event contracts under the Commodity Exchange Act. The Sixth Circuit panel rejected that notion.
What happens next in the legal fight?
It is widely expected that the question of who can regulate prediction markets’ sports contracts will eventually be heard at the U.S. Supreme Court. No timetable has been disclosed, and it is not yet known whether Kalshi will seek further review.
AI Notice: This article was created wholly or predominantly with the assistance of artificial intelligence and was published without human editorial review.
This article is for general information only and does not constitute investment advice. Always do your own research before making trading decisions.