What the court decided
The 6th US Circuit Court of Appeals in Cincinnati ruled on Friday 25 September 2026 that Ohio and Tennessee are free to apply their gambling laws to the sports-related event contracts sold by prediction-market operator Kalshi. Writing for a unanimous three-judge panel, Judge Julia Smith Gibbons rejected Kalshi's argument that its federal registration shields those contracts from any state oversight.
The decision consolidated appeals from district-court cases in the two states. At its heart is a narrow but decisive question of definition. The panel accepted that Kalshi's products are conditioned on the occurrence of events, but concluded that nothing in the statute requires an event to be defined so as to exclude a sporting outcome. As the opinion put it, the court declined to read such a limitation into the statutory definition itself.
Why the word swaps decides everything
Kalshi is registered with the Commodity Futures Trading Commission, which oversees derivatives and futures. The company contends that its event contracts are swaps traded on a federally registered exchange, and that the Commodity Exchange Act, as amended by Dodd-Frank, preempts state gaming law entirely. On that theory, a state gambling regulator has no more say over a Kalshi contract than over an oil futures trade.
The Sixth Circuit disagreed, holding that the sports contracts are not swaps and are therefore subject to state gaming rules rather than the CFTC's. That finding matters far beyond Kalshi. If sports event contracts are gambling products rather than financial derivatives, then the entire wave of prediction-market sports trading that spread through 2025 and 2026 sits squarely inside the same licensing and tax regimes that govern sportsbooks.
“Ohio and Tennessee can regulate event contracts under their gambling laws.”
A widening split among the courts
The ruling hardens a genuine disagreement between the federal circuits. The 3rd Circuit in Philadelphia sided with Kalshi on preemption in a New Jersey case. The 9th Circuit in San Francisco went the other way on 28 August 2026, ruling that sports event contracts are not swaps and that federal law does not displace state gambling regulation. The 4th Circuit heard argument in a Maryland case in early May. With appellate courts now openly disagreeing, the dispute looks like a strong candidate for the US Supreme Court.
According to a September tracker from law firm DLA Piper, nineteen states are tangled in prediction-market litigation. Kalshi has filed its own declaratory actions against states including Nevada, New Jersey, Maryland, Ohio, New York and Utah, while the CFTC has brought preemption suits of its own. The result is a patchwork in which the same contract can be lawful in one state and an illegal bet in the next.
Our take
The through-line of the 2026 rulings is that most appellate judges are unwilling to accept that labelling a wager a financial contract removes it from gambling law. For licensed sportsbooks that pay state taxes and fund problem-gambling programmes, the Sixth Circuit decision is welcome; it narrows the regulatory gap that prediction markets had used to reach bettors in states without legal sportsbooks.
For Kalshi and its peers, the path now runs through the Supreme Court or Congress. Until one of those speaks, expect operators to keep trading where courts have been friendly and to retreat where, as in Ohio and Tennessee this week, judges have handed the whistle back to the states.
Frequently asked
What did the Sixth Circuit actually rule?
That Ohio and Tennessee can apply their gambling laws to Kalshi's sports event contracts, because those contracts are not swaps under federal commodities law and so are not shielded by the CFTC's jurisdiction.
Does this shut Kalshi down nationwide?
No. The decision binds the states in the Sixth Circuit. Other circuits have ruled differently, so Kalshi's legal position varies by region until a higher court or Congress settles the question.
Why does the swaps question matter so much?
If a sports event contract is a swap, it is a federally regulated derivative beyond state reach. If it is not, it is treated as a bet and falls under state gambling licensing, taxes and consumer-protection rules.