Sixth Circuit rules Kalshi sports-event contracts are not swaps

A federal appeals court ruled on September 25, 2026, that Kalshi has not shown its sports-event contracts are “swaps” subject to the Commodity Futures Trading Commission’s “exclusive jurisdiction” — and that even assuming they are swaps, the Commodity Exchange Act neither expressly nor impliedly preempts Ohio’s or Tennessee’s gambling laws.

A three-judge panel of the U.S. Court of Appeals for the Sixth Circuit affirmed the Southern District of Ohio’s denial of Kalshi’s motion for a preliminary injunction, vacated the Middle District of Tennessee’s grant of one, and remanded for further proceedings, finding Kalshi had not shown a likelihood of success on the merits.

Sixth Circuit rules against Kalshi in the Ohio and Tennessee appeals

Judge Julia Smith Gibbons wrote the opinion in the consolidated cases — KalshiEX LLC v. Schuler, No. 26-3196, and KalshiEX LLC v. Orgel, No. 26-5235 — joined by Judges Eric Clay and Rachel Bloomekatz. The appeals were argued July 30, 2026, and decided and filed September 25.

Kalshi is a financial services company that operates a designated contract market, where participants buy and sell “event contracts” — derivatives whose payoff depends on a specified event, occurrence or value. The ruling addresses, at the preliminary-injunction stage, Kalshi’s lawsuits challenging Ohio’s and Tennessee’s efforts to apply their sports-gambling laws to the sports-event contracts Kalshi began listing in early 2025.

Why the court says sports-event contracts are not swaps

The dispute turned on the Dodd-Frank Act’s definition of “swap” in 7 U.S.C. § 1a(47)(A)(ii): an agreement providing for payment dependent on the occurrence of an event “associated with a potential financial, economic, or commercial consequence.”

The panel held that a qualifying event must be “intrinsically associated with a financial consequence,” such that “we can reasonably understand why hedging financial risk or ascertaining pricing information for the occurrence of that event would be desired and beneficial (e.g., a change in interest rates).” On that reading, the court held, Kalshi’s sports-event contracts are not swaps: they “have only downstream economic consequences, assuming they have the potential to cause economic consequences at all.”

Who is named Super Bowl MVP, for example, would likely have no financial consequences of its own, the court wrote; any would depend on external, downstream events, such as a sponsor deciding to award the winner a prize. Applying the test to Kalshi’s markets — including contracts on the number of corner kicks in a soccer game and on whether a broadcaster says a particular word on air — the opinion said “there is no conceivable reason why the market might need to know the probability that a broadcaster says a random word on air.”

The panel also noted that Kalshi has conceded in past litigation that its sports-event contracts have “no inherent economic significance,” do not “have any real economic value,” and “carry no economic risks.” And because federal law makes it generally unlawful to enter into a swap off a regulated market, the court said Kalshi’s interpretation would reach “every sports wager placed in a casino, on an online sports book, or between two friends at a bar” — a result it declined to adopt.

No preemption even if the contracts were swaps

Even assuming the contracts are swaps, the court held the Commodity Exchange Act does not expressly, field- or conflict-preempt the states’ gambling laws. It construed the statute’s “exclusive jurisdiction” provision narrowly: the provision displaces direct state regulatory and enforcement authority over the licensing and operation of designated contract markets, but not ancillary laws that only incidentally burden them.

Ohio’s and Tennessee’s laws impose no restrictions on the designation or operation of contract markets as such, the panel wrote — they regulate sports betting, and their effects on contract markets “are felt only because DCMs like Kalshi have decided to offer event contracts that ‘are virtually indistinguishable from’ sports bets.” Rejecting impossibility preemption, the court said CFTC impartial-access rules do not require an exchange to offer any particular market, noted that other companies have used geofencing to comply with both regimes, and wrote that “expensive does not mean impossible.”

How the Ohio and Tennessee cases reached the court

Kalshi has been registered as a designated contract market with the CFTC since 2020. On January 22, 2025, it self-certified and began listing sports-event contracts, and it has marketed itself as “the first nationwide legal sports betting platform.”

The Ohio Casino Control Commission sent Kalshi a cease-and-desist letter over offering sports-event contracts without a sports gaming license; Kalshi sued in the Southern District of Ohio seeking declaratory and injunctive relief, and the district court denied its motion. A Sixth Circuit motions panel then denied Kalshi an injunction pending appeal on April 24, 2026, holding the company had “shown at most only that the merits [were] in equipoise” given Ohio’s interest in enforcing its laws.

In Tennessee, the Sports Wagering Council sent Kalshi a cease-and-desist letter in early 2026. Kalshi sued in the Middle District of Tennessee, which granted a preliminary injunction in February 2026 after concluding the contracts are likely swaps and that conflict preemption applies — the ruling the Sixth Circuit has now vacated.

A widening circuit split and New Jersey’s Supreme Court petition

The Sixth Circuit’s opinion itself maps the divide: the Third Circuit affirmed a New Jersey district court order granting Kalshi a preliminary injunction (KalshiEX v. Flaherty), while the Ninth Circuit on August 28, 2026, affirmed a Nevada order dissolving Kalshi’s injunction (KalshiEX v. Assad); a Fourth Circuit appeal in the Maryland case (KalshiEX v. Martin) remains pending. The Third Circuit issued its decision April 6, 2026, by a 2-1 vote.

New Jersey Attorney General Jennifer Davenport and Division of Gaming Enforcement interim director Mary Jo Flaherty petitioned the U.S. Supreme Court on September 2, 2026, presenting the question whether the 2010 Dodd-Frank Act preempted states from regulating sports bets occurring within their jurisdictions when offered on CFTC-registered markets. Their petition told the justices the dispute has generated “at least 39 lawsuits across 20 States” and an acknowledged split between the Third and Ninth Circuits. Friday’s ruling places the Sixth Circuit on the states’ side of that divide.

The CFTC backed Kalshi, and the company answered the ruling

The CFTC had weighed in on Kalshi’s side. On May 12, 2026, the commission filed an amicus brief in the Sixth Circuit asserting its exclusive jurisdiction over prediction markets and supporting Kalshi’s bid for reversal. The brief argued that event contracts traded on CFTC-regulated markets are swaps and that the CEA preempts state law as applied to them, and it asked the court to reverse and remand with instructions to enter a preliminary injunction — the positions the panel rejected.

“The federal district court in Ohio took an improperly narrow view of the Commission’s jurisdiction, and we are asking the Court of Appeals to correct that error,” CFTC Chairman Michael S. Selig said in the May announcement, adding that the CFTC “will not allow overzealous state governments to undermine the agency’s longstanding authority over these markets.” The release said the commission has sued Arizona, Connecticut, Illinois, New York and Wisconsin, secured a preliminary injunction against state regulation of prediction markets in Arizona, and filed amicus briefs in the Ninth Circuit and the Supreme Judicial Court of Massachusetts.

Kalshi said it disagreed with the decision. “The law does not require a swap to involve ‘intrinsic’ financial consequences — and even if it did, sports clearly do,” company spokesperson Dani Lever told Courthouse News. Lever said the ruling “shows exactly why a state-by-state patchwork doesn’t work,” arguing that “markets can’t operate when the rules change at every state line, which is why Congress created a single federal regulator with nationwide rules.”