The 6th US Circuit Court of Appeals has ruled against prediction market Kalshi in its dispute with Ohio and Tennessee, a decision that pushes the whole case closer to the Supreme Court. The company now has to defend its right to offer sports-event contracts before three appellate courts that have reached opposite conclusions.
Kalshi operates as an exchange for trading contracts on event outcomes, registered with the Commodity Futures Trading Commission (CFTC). The company has argued for years that its products are federally regulated financial derivatives, not gambling products subject to state oversight.
Three circuits, three different rulings
On Friday, a three-judge panel at the 6th Circuit sided unanimously with the states. The judges found that Kalshi failed to show its sports-event contracts qualify as "swaps" under CFTC jurisdiction. It is the second such ruling against the company in a month, after the 9th Circuit reached the same conclusion last month.
Back in April, the 3rd Circuit went the other way. It found that federal law likely preempts New Jersey's gambling regulations and let Kalshi keep operating in the state while its appeal moved forward. Three circuits now hold three different positions on the same legal question, and none of them is final.
Ohio and Tennessee gain control over sports contracts
The 6th Circuit's ruling means Ohio and Tennessee can regulate Kalshi's sports contracts under their own gambling laws. For the company, this is not just a lost case, it is a direct threat to its business model in two states where sports-event contracts could now require a gambling license.
Similar lawsuits against Kalshi and other prediction platforms are moving through other states as well. Each new ruling redraws the map of where the company can legally offer sports-event contracts and where it cannot.
The fight comes down to the word "swap"
One legal question sits at the center of the case. Is a bet on a sporting outcome a financial derivative under CFTC oversight, or a gambling product under state oversight? Kalshi argues for the former. If the contracts count as federal "swaps," the Commodity Exchange Act overrides state rules.
The states counter that sports contracts are not meaningfully different from traditional sports betting, just repackaged as an exchange-traded product. The 6th and 9th Circuits accepted that reasoning, while the 3rd Circuit found Kalshi's federal-preemption argument convincing. It is a rare case where two appellate courts read the exact same federal statute in opposite ways.
Prediction markets are operating under a patchwork of rules
Until the question is settled for good, event-betting platforms are running on legal uncertainty, and Kalshi is not the only one affected:
- Operators cannot know in advance which states will treat their products as legal exchange contracts.
- Every new lawsuit adds legal costs and slows expansion into new markets.
- Rivals such as Polymarket are watching the case closely, since the precedent will shape the whole prediction-market industry.
- Users in Ohio and Tennessee risk losing access to familiar contracts before a final ruling arrives.
On Wednesday, a group of state lawmakers filed an amicus brief with the Supreme Court, urging it to take up the case and settle the line between federal and state authority once and for all.
The Supreme Court could decide the industry's fate
The case is landing just as the CFTC works on broader rules for the crypto market. Days after the Senate failed to advance the Clarity Act on September 15-16, the agency submitted a new regulatory package on crypto asset transactions for White House review. Details have not been disclosed, but analysts already expect more aggressive rulemaking from the SEC and CFTC in the near term, with the Kalshi ruling forming part of that bigger picture.
A circuit split is a classic trigger for Supreme Court review. When federal appeals courts read the same statute in conflicting ways, the high court usually steps in for a final word. Lawyers are already framing this as a matter of when, not if.
If the justices agree to hear it, the ruling will decide whether sports-event contracts are regulated the same way nationwide or whether each state gets to ban them on its own. Until then, Kalshi keeps fighting the same battle in multiple circuits at once, and its business depends on which states choose to act first.
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