On September 25, 2026, a unanimous panel of the U.S. Court of Appeals for the Sixth Circuit ruled that Ohio and Tennessee may apply their gambling laws to Kalshi's sports event contracts, a significant setback for the venue's federal-preemption defense, according to reporting by Reuters correspondent Jonathan Stempel.
The three-judge panel held that Kalshi had not shown its sports contracts qualify as swaps under the Commodity Exchange Act, and therefore do not fall within the CFTC's exclusive jurisdiction. In the alternative, the panel held that the Commodity Exchange Act neither expressly nor impliedly preempts Ohio's or Tennessee's gambling laws, even if the contracts were swaps, per the Reuters report. The court affirmed the Southern District of Ohio's denial of a preliminary injunction and vacated a Tennessee federal judge's injunction that had protected Kalshi, remanding for further proceedings.
Circuit Judge Julia Smith Gibbons, writing for the panel, said swaps generally refer to financial measures, indices and instruments used to hedge risks rather than gaming-related contracts, per Reuters. 'We hold that Kalshi has not shown that its sports-event contracts satisfy the statutory definition of a swap so as to fall within the scope of the CFTC's exclusive jurisdiction,' Gibbons wrote, as quoted in Deadspin's coverage of the opinion. She added that 'it is, therefore, 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 serve (to) advance those goals' of the Commodity Exchange Act, per Reuters.
Kalshi said it does not expect the decision to survive further legal review. 'The ruling shows exactly why a state-by-state patchwork doesn't work,' Kalshi spokesperson Dani Lever said, per Reuters. 'Markets can't operate when the rules change at every state line, which is why Congress created a single federal regulator with nationwide rules.' Tennessee Attorney General Jonathan Skrmetti called the decision a 'great win' for his state, saying, '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,' per Reuters.
The ruling deepens a split among the federal appeals courts over who regulates prediction markets, per Reuters. The Ninth Circuit in San Francisco said last month that Kalshi's event contracts are subject to Nevada's gambling laws, while the Third Circuit in Philadelphia said in April that the contracts are not subject to New Jersey's gambling laws. New Jersey has asked the Supreme Court to overturn the Third Circuit decision, raising the prospect that the nation's highest court settles the matter.
Separately, Missouri Attorney General Catherine Hanaway issued formal cease-and-desist notices on September 16 and 17 to six of the largest prediction market platforms, Kalshi, Polymarket, Robinhood, Underdog, Novig and Crypto.com, arguing that sports event contracts traded on the platforms fall squarely within Missouri's legal definition of sports betting, per Sportsbook Review. 'Missourians voted for a safe, well-regulated sports wagering market that supports public education and addresses problem gambling. Companies cannot repackage sports bets as event contracts to avoid Missouri law,' Hanaway said. The six operators have 30 days from the date of the notices to stop accepting sports event contracts from Missouri residents, and failure to comply could lead to formal litigation, per the report.
Missouri joins a growing patchwork of state actions. Sportsbook Review reported that Michigan regulators have barred Kalshi from offering sports-related event contracts to residents after a series of court orders, with a preliminary injunction granted in September keeping the ban in place during litigation. Prediction News reported that Missouri joins Connecticut's live lawsuit, Nevada's enforced geofence and New Jersey's Supreme Court bid in the state-by-state contest over Kalshi's federal preemption shield. With the Ohio and Tennessee cases remanded, the Missouri compliance clock running and Supreme Court petitions pending, Kalshi's legal docket is now as central to its business as its trading volume.