Sixth Circuit finds Kalshi sports contracts outside federal swap rules

Three judges on the Sixth Circuit spent Friday working through a question that sounds technical until you see what it costs: whether a contract on the New York Giants winning a Super Bowl is a federally regulated swap, or something a state can simply prohibit. They concluded it is not a swap. That conclusion is now the third different answer a federal appeals court has given to the same question.

The Sixth Circuit's reasoning turned on a clause in the statutory definition of swaps — the requirement that a contract depend on events "associated with a potential financial, economic, or commercial consequence." A Giants Super Bowl victory, the panel found, does not meet that bar. The outcome is the event itself, not a consequence of some underlying economic condition. Kalshi had argued the opposite: that any contingent contract fits the swap definition, and therefore falls under CFTC jurisdiction, which would preempt state gambling law. The panel disagreed.

What makes this reading consequential is where it sits in the circuit map. The Third Circuit has held that the CFTC does have jurisdiction over prediction markets. The Eighth Circuit found that sports contracts specifically are not swaps. The Sixth Circuit has now reached the same destination as the Eighth, via different reasoning. Three circuits, three decisions, two camps. That is a circuit split structured precisely to compel Supreme Court review, and Kalshi has already asked for it.

The states pushing hardest on this — Ohio and Tennessee were the direct parties in Friday's case — are operating on a straightforward fiscal logic. Prediction markets charge no state tax. Licensed sportsbooks do. If a platform can claim federal preemption and serve bettors at eighteen rather than twenty-one, it competes with every state-licensed operator on price, accessibility, and regulatory overhead simultaneously. The tax argument rarely makes the legal briefs, but it is the engine underneath all of them.

Kalshi's position has always depended on the preemption argument holding. The company needed federal jurisdiction to function as a nationally uniform product. Every circuit loss narrows that uniform space and hands individual states an enforcement template. Montana used one version of that template. Ohio and Tennessee are now constructing their own.

The consensus reading is that the Supreme Court will eventually take the case. The consensus is probably right here, and checking against my own contrarianism only strengthens that view — the split is too clean to resolve any other way. What is less settled is what the Court does when it gets there. A ruling that the swap definition excludes sports outcomes would validate what three circuits have now said, but the statutory text the Sixth Circuit worked through is genuinely ambiguous. The Third Circuit read the same words and reached the opposite conclusion, and its reasoning was not careless.