Kalshi Loses Sixth Circuit Appeal Over Sports Contracts

Prediction market Kalshi lost its appeal when the Sixth U.S. Circuit Court of Appeals ruled that Ohio and Tennessee can enforce their gambling laws against its sports-event contracts. A three-judge panel decided unanimously Friday that the company failed to show the contracts are swaps under the Commodity Futures Trading Commission's exclusive jurisdiction, Cointelegraph reported.

The decision resolves two cases with opposite procedural histories. Kalshi had sued regulators in both states seeking injunctions against enforcement. An Ohio federal court denied its motion, while a Tennessee federal court granted one. Friday's ruling affirms the Ohio denial and vacates the Tennessee injunction, CoinDesk wrote.

The panel agreed Kalshi had the right to bring the cases but rejected its reading of the statute. "While we agree with Kalshi that its sports-event contracts are conditioned on the occurrence of 'events,' we conclude that Kalshi's contracts do not depend on events that are 'associated with a potential financial, economic, or commercial consequence' within the meaning of the statute," the judges wrote.

To explain the point, the ruling used the New York Giants winning a Super Bowl as its example. If the event is defined as the Giants winning, then the victory is simply that event having occurred. If the event is the game being played, then the win is the outcome. "The proper terminology, then, seems to turn on how the event itself is defined," the ruling said. "And because nothing in the statutory text provides a clear indication that the event must be defined to exclude outcomes, we decline to read such a limitation into the statutory definition ourselves."

States have pressed this fight since prediction markets took off after the 2024 election. Their argument is that sports contracts on federally regulated platforms match gambling products while skipping state taxes and state age gates. Federally regulated venues often serve customers as young as 18, where most state gambling operators must set the line at 21. For many states, that gap plus the missing tax revenue is the core of the dispute.

The states describe the products as identical to what gambling sites and apps sell, offered in direct competition with state-licensed platforms that pay state taxes. Federally regulated venues keep the revenue while skipping the state tax bill, in the states' account, and that mismatch is the grievance driving case after case. Friday's decision is the latest appellate answer in a fight still spreading across circuits, and each new ruling gives the Supreme Court more reason to step in, CoinDesk noted.

The Sixth Circuit is the latest appeals court to weigh in, and its answer deepens a split. Last month the Ninth Circuit reached a similar conclusion against Kalshi. In April, by contrast, the Third Circuit said the company was likely to succeed on its claim that federal law preempts New Jersey's rules, letting it operate there while its appeal proceeds. The Eighth Circuit has also ruled on prediction markets, holding that sports-related contracts are not swaps.

That kind of divide is what draws Supreme Court review. A group of state lawmakers filed an amicus brief Wednesday urging the justices to take up the Kalshi dispute and settle whether state or federal authorities control prediction markets, Cointelegraph noted. The Third Circuit case has already been appealed to the high court: New Jersey asked the justices to resolve the conflict, and Kalshi's response is due Nov. 9, according to CoinDesk.

Kalshi's position has been that federal law preempts state rules, the argument the Third Circuit found likely to succeed in April. The Sixth Circuit rejected that reading for sports contracts, holding they fall outside the swaps definition that would trigger exclusive federal oversight.

The immediate effect is that Ohio and Tennessee regulators can proceed against the company's sports offerings while the broader jurisdictional question stays open.