TL;DR
- A federal appeals court cleared Ohio and Tennessee to enforce their sports betting laws against Kalshi while the underlying lawsuits continue.
- The Sixth Circuit rejected Kalshi’s argument that federal commodities law currently shields its sports contracts from state enforcement.
- The decision adds to a widening split among federal appeals courts over whether states can regulate sports contracts offered by prediction markets.
A US appeals court has cleared Ohio and Tennessee to enforce their sports betting laws against Kalshi, a prediction market platform, while lawsuits over its sports-event contracts continue. The September 25 ruling removes a court order that had protected Kalshi from Tennessee enforcement and leaves an earlier Ohio decision against the company in place.
The dispute turns on whether a federal license to operate an event-contract exchange shields a platform from state rules when customers trade on sports results. For these two states, a three-judge panel of the Sixth Circuit said Kalshi had not shown that it does.
What changed in each state
Ohio and Tennessee regulators had told Kalshi to stop offering sports contracts to residents without state sports wagering licenses. Kalshi sued, arguing that federal commodities law gave the Commodity Futures Trading Commission (CFTC) exclusive authority over its exchange.
Ohio’s Casino Control Commission issued its order in March 2025, saying the contracts were open to people younger than 21. A federal judge refused Kalshi’s request to block the order in March 2026, and the appeals court upheld that decision. In April, the commission proposed a $5 million fine against Kalshi for offering unlicensed sports gaming.
Tennessee’s Sports Wagering Council issued its order in January 2026, and Kalshi won a temporary block within days. A federal judge turned that into an injunction in February. The appeals court vacated the injunction and sent the case back to the lower court. The council’s order can now be enforced.
Why the federal license did not settle the dispute
Kalshi operates a federally regulated designated contract market. On its platform, a sports-event contract pays out according to an outcome, such as which team wins a game. Kalshi argued that these contracts qualify as financial instruments called swaps. Federal law gives the CFTC exclusive jurisdiction over certain swaps traded on designated markets.
The Sixth Circuit rejected the argument at this stage. The court read the statutory definition to cover events with a direct financial consequence, such as an interest rate rise or a debt default. Effects of a game on sponsors, advertisers and local businesses were too indirect and speculative to meet that definition. The opinion also noted Kalshi’s earlier concession that its sports contracts have no inherent economic significance.
Addressing Kalshi’s fallback argument, the judges said that even if the sports contracts counted as swaps, the federal Commodity Exchange Act would not override Ohio’s or Tennessee’s sports gambling laws. Those laws govern wagering in the states and only incidentally affect a federally regulated exchange, the panel reasoned.
A Kalshi spokesperson told The Block that the law does not require a swap to involve intrinsic financial consequences, and that sports have them anyway. The company said differing state rules make operating unworkable and does not believe the ruling will survive further review.
>>> Read more: Nevada Court Order Tests State Gaming Law vs Polymarket
What this means for users and other prediction markets
Whether Kalshi customers in Ohio and Tennessee keep access to sports contracts depends on what the states and Kalshi do next. Both states are free to act on their orders, which demand that Kalshi stop offering sports contracts to residents without a state license.
Users of other prediction markets have a stake as well, because regulators in both states sent orders to other providers. Ohio sent cease-and-desist notices to Robinhood and Crypto.com in March 2025, the same day as the one to Kalshi. Tennessee’s January order named Polymarket and Crypto.com’s Nadex.
The national picture remains unsettled. The Third Circuit previously sided with Kalshi in a New Jersey case at the preliminary stage, while the Ninth Circuit ruled against it in Nevada. New Jersey has asked the US Supreme Court to review its case. Kalshi’s appeal in a Maryland case is pending before the Fourth Circuit, which would be the fourth federal appeals court to rule on the company’s sports contracts.
>>> Read more: CFTC Defends Prediction Markets Against State Challenges
The conflict runs between regulators as well as between courts. The CFTC, under Chair Michael Selig, holds that it alone oversees event contracts on designated exchanges, and it filed a brief backing Kalshi in the Ohio appeal in May. Numerous states have taken enforcement action or sued Kalshi over its sports contracts. New York sued Kalshi on July 31 to stop it from operating without a state license. The petition seeks restitution and penalties, including $100,000 for each unauthorized offer of sports wagering. New York sued Polymarket US on September 24, one day before the Sixth Circuit ruled. Polymarket filed its own federal lawsuit against the state and its Gaming Commission the same day, arguing that states cannot regulate swaps.
