News · September 26, 2026, 16:22 UTC · Based on reporting by CNBC, Courthouse News Service. The original court opinion was not available to us at the time of publication.
A federal appeals court has ruled that states may regulate sports-related event contracts offered by prediction market platform Kalshi, according to reports from CNBC and Courthouse News Service. 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 to us; details are based on the outlets’ reporting.
The decision is the second time a federal court of appeals has held that states have a role in regulating prediction markets’ sports offerings, according to CNBC. The outlets reported that the question of who can regulate these contracts is widely expected to reach the U.S. Supreme Court.
What happened
According to CNBC, 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,” CNBC reported.
Courthouse News Service reported that 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, according to Courthouse News Service. The panel said Kalshi’s sports event contracts have only downstream economic consequences, the outlet reported. Judges Eric Clay and Rachel Bloomekatz joined Gibbons on the panel, Courthouse News Service reported.
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, according to CNBC. 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,” CNBC reported.
Kalshi spokesperson Dani Lever said the platform disagreed with the decision, according to CNBC. 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 told Courthouse News Service 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, CNBC reported, and the Ohio and Tennessee attorneys general’s offices did not immediately respond to requests from Courthouse News Service.
Analysis: Why it matters for investors
According to CNBC, 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, CNBC reported. That divide among circuits could increase uncertainty for platforms whose business models depend on a single federal regulatory framework, though the sources do not quantify any financial impact.
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. CNBC reported that such a high court review is widely expected. The sources do not disclose any timetable for further appeals or any potential financial exposure for Kalshi or other platforms.
Who is affected
According to the sources, the immediate parties are Kalshi, the CFTC, and the states of Ohio and Tennessee. CNBC reported that 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 that the Sixth Circuit panel rejected that notion. Courthouse News Service reported that 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.
The sources also indicate that 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. The sources do not name additional platforms beyond Kalshi.
What is still uncertain
It is not clear from the sources 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; CNBC reported 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, according to Courthouse News Service.
The sources do not provide details on how the ruling might affect Kalshi’s operations in Ohio and Tennessee, nor any compliance costs or revenue figures. The timing and scope of any Supreme Court consideration remain undisclosed.
Conclusion: What to watch next
According to CNBC, 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. The sources do not indicate when any of those developments might occur.
Sources
- CNBC: Appeals court rules that states can regulate Kalshi’s sports prediction markets, dealing another legal blow to platforms (published 2026-09-25)
- Courthouse News Service: Sixth Circuit says states can regulate Kalshi’s prediction markets (published 2026-09-25)
Sources accessed on September 26, 2026. Figures as reported by the sources above.
Frequently Asked Questions
What did the Sixth Circuit rule about Kalshi’s sports event contracts?
According to CNBC and Courthouse News Service, 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?
CNBC reported 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, according to CNBC.
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, according to CNBC. Tennessee Attorney General Jonathan Skrmetti said Kalshi attempted an end run around Tennessee law, CNBC reported.
What is the CFTC’s position in these disputes?
CNBC reported that 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, according to CNBC.
What happens next in the legal fight?
CNBC reported 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. The sources do not disclose any timetable or whether Kalshi will seek further review.
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