The 6th U.S. Circuit Court of Appeals in Cincinnati ruled on Friday that Ohio and Tennessee can regulate Kalshi‘s event contracts under their state gambling laws, handing the prediction-market operator a loss in its fight to keep the industry under exclusive federal oversight.
The decision vacated a preliminary injunction a Tennessee federal judge had issued against enforcement of that state’s gambling statutes, and separately upheld an Ohio federal judge’s denial of a similar injunction. Writing for a unanimous three-judge panel, Circuit Judge Julia Smith Gibbons said Kalshi failed to show that its sports event contracts qualify as swaps subject to exclusive CFTC oversight, and held that the Commodity Exchange Act does not preempt either state’s gambling laws.
Kalshi spokesperson Dani Lever pushed back on the outcome, arguing the ruling exposes the flaw in letting states set their own rules.
“The ruling shows exactly why a state-by-state patchwork doesn’t work,” Lever said. “Markets can’t operate when the rules change at every state line, which is why Congress created a single federal regulator with nationwide rules.”
A Widening Circuit Split
Friday’s ruling adds a third data point to an increasingly fractured appellate landscape. Last month, the 9th Circuit found that Kalshi’s contracts fall under Nevada’s gambling laws, while the 3rd Circuit reached the opposite conclusion in April, ruling that Kalshi’s contracts are not subject to New Jersey’s gambling statutes. New Jersey has since asked the Supreme Court to overturn that 3rd Circuit decision, and the 6th Circuit’s contrary outcome in Ohio and Tennessee only strengthens the case for the justices to step in and resolve which framework governs nationwide.
Gibbons framed the legal distinction sharply, writing that swaps generally describe financial instruments used to hedge risk rather than gaming-related contracts. She added that gambling regulation lies at the heart of the state’s police power and that Congress left states with primary responsibility over what forms of gambling can take place within their borders. Questioning whether Kalshi’s markets serve the Commodity Exchange Act’s risk-management purpose, she wrote that it is difficult to see how determining the probability that a certain number of corner kicks will be taken in a given soccer game – or that a 30-leg parlay will hit – would advance those goals.
Kalshi said it does not expect the decision to survive further legal review, signaling it will continue litigating rather than treat the ruling as final. Tennessee Attorney General Jonathan Skrmetti took the opposite view, calling the outcome a great win for his state.
“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,” Skrmetti said.
Ohio Attorney General Andy Wilson’s office did not immediately respond to requests for comment. The broader tension between state gambling authority and federal commodities regulation now sits squarely before three circuits with conflicting answers, and the record so far shows only that the potential for Supreme Court review has grown – not that the justices have agreed to take it up.
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