Sixth Circuit Hands Kalshi a Defeat, Clearing States to Regulate Sports Prediction Markets

What happened

A unanimous three-judge panel of the Sixth U.S. Circuit Court of Appeals ruled on Friday, September 25, 2026, that Ohio and Tennessee can apply their state gambling laws to Kalshi's sports-related event contracts, rejecting the prediction-market platform's claim that the Commodity Futures Trading Commission holds exclusive jurisdiction over its products. The panel held that "Kalshi has not shown that its sports-event contracts satisfy the statutory definition of a 'swap' so as to fall within the scope of the CFTC's 'exclusive jurisdiction,'" and went further, holding that "even assuming that Kalshi's sports-event contracts are swaps, we alternatively hold that the CEA neither expressly nor impliedly preempts Ohio's or Tennessee's gambling laws." The decision, reported by CNBC, overturns a Tennessee federal district court ruling that had sided with Kalshi and reaffirms an Ohio federal district court decision that sided with the states. The ruling is the second federal appeals-court defeat for the prediction-markets industry on sports contracts in as many months: last month the Ninth Circuit held that Nevada can regulate sports-related event contracts, calling them sports bets rather than swaps, while in April the Third Circuit ruled the other way, holding against New Jersey that the CFTC has exclusive jurisdiction over all swaps.

The dispute turns on a definitional question with large consequences. Kalshi and other prediction-market platforms argue their event contracts are "swaps," financial derivatives regulated federally under the Commodity Exchange Act, while the states contend the sports offerings amount to gambling subject to local sports-betting laws. Tennessee Attorney General Jonathan Skrmetti framed the outcome as a win for state oversight, saying: "Kalshi attempted an end run around Tennessee law to avoid any of the rules or taxes associated with sports gambling. They failed." He added that "sports wagering is heavily regulated because it can do a lot of harm, and I'm glad we thwarted Kalshi's efforts to remove every safeguard and put Tennessee sports bettors at risk." Kalshi spokesperson Dani Lever pushed back in a statement carried by CoinDesk: "the ruling shows exactly why a state-by-state patchwork doesn't work… Markets can't operate when the rules change at every state line, which is why Congress created a single federal regulator with nationwide rules." The CFTC did not immediately respond to a request for comment.

Why it matters

The ruling deepens a circuit split over who regulates sports-event contracts, and the industry's federal preemption argument is now losing ground in the courts. The Sixth Circuit's rejection of preemption came despite the fact that the CFTC has sued nine states to defend what it sees as its exclusive right to regulate event contracts under the Commodity Exchange Act. With the Sixth and Ninth Circuits now aligned against the industry and the Third Circuit aligned with it, the stage is set for Supreme Court review: New Jersey petitioned the high court earlier this month, and a fight over who regulates sports-event contracts is widely expected. For platforms, the practical stakes are operational as much as legal. If state gambling laws apply, each state line brings its own licensing, tax and consumer-protection regime, the very patchwork Kalshi's spokesperson argues markets cannot function under. For states, the decision affirms their ability to enforce sports-betting rules, including safeguards and tax collection, against federally regulated trading platforms. Readers should also note the disclosure flagged by CNBC: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.

How it is being covered

According to ground.news, the story is carried by 14 sources, 10 of them rated, with a centre-heavy split of roughly 10 percent left, 70 percent centre and 20 percent right. Eight of the 10 rated sources score high or very high on factuality, with one rated low, one mixed and four unrated. The blindspot sits on the left, where only about 10 percent of coverage originates, meaning left-leaning outlets are largely absent from the conversation around this ruling.

What to watch

Three threads merit attention in the coming weeks. First, whether Kalshi seeks en banc rehearing at the Sixth Circuit or petitions the Supreme Court to join New Jersey's pending petition, which would consolidate the circuit split into a single case. Second, any response from the CFTC, which has so far not commented on the ruling but has sued nine states in defence of its jurisdictional claim. Third, whether other states move to enforce their gambling laws against prediction-market platforms now that two federal appeals courts have upheld that authority, and whether platforms geofence sports contracts in Ohio and Tennessee in the interim.

By the numbers

• 2: federal appeals courts to rule against the industry on sports contracts (Sixth Circuit on Friday, September 25, 2026; Ninth Circuit last month)
• 9: states the CFTC has sued to defend exclusive jurisdiction over event contracts
• 3: judges on the Sixth Circuit panel, ruling unanimously
• 2: states at issue in the ruling, Ohio and Tennessee
• April 2026: date of the Third Circuit's contrary ruling, against New Jersey, holding the CFTC has exclusive jurisdiction over all swaps

Source snapshot