Sixth Circuit ruling arms Ohio as ten prediction market firms face exit

Andromeda Morrison had a court ruling and a deadline. On October 16, ten prediction market operators must confirm to the Ohio Casino Control Commission that they have stopped offering sports event contracts to Ohio residents, or face administrative, civil, and criminal consequences. Morrison, the commission's interim executive director, issued the cease-and-desist notices on the basis of a Sixth Circuit ruling from September 25, which found that the Commodity Exchange Act does not preempt Ohio's sports-gaming laws.

The ten companies named — Underdog, Gemini Titan, Coinbase, ProphetX, Novig, Robinhood Derivatives, Polymarket's U.S. entity, Plus500US Financial Services, Moomoo Financial, and Webull Financial — hold no Ohio gambling licence. Kalshi was absent from the list, which the commission attributed to ongoing separate litigation. The practical effect is that Ohio has just swept the field of every meaningful competitor not already tangled in its courts.

The Sixth Circuit's logic, written by Circuit Judge Julia Smith Gibbons, is worth sitting with. The court did not say federal law was irrelevant. It said Ohio's gambling laws don't directly regulate designated contract markets — they just produce incidental effects on them. That framing matters enormously, because it narrows the preemption argument that prediction market firms have been running in federal courts across multiple states. If a state law need only be nominally about gambling rather than specifically targeted at CFTC-registered entities, the statutory moat the exchanges thought they had turns out to be considerably shallower.

The Illinois federal court reached the opposite conclusion in roughly the same period, finding Kalshi's contracts were likely swaps and that parts of Illinois gambling law were likely preempted. The split is now live, documented, and unresolved. That is the condition that tends to pull cases toward the Supreme Court, which is where multiple parties are already pushing.

The consensus read of this situation treats the circuit split as a sign of genuine legal uncertainty, with the outcome too close to call. The consensus may be right here, and I am conscious of checking my own tendency to reach for the contrarian position. But I think the framing underweights one structural fact: the Sixth Circuit's incidental-effects test is more durable than the swap classification argument, because it doesn't require a court to decide what the contracts fundamentally are. It only requires a court to find that the state wasn't targeting the exchanges specifically. That's a much easier holding to write and to defend on appeal.

The Michigan settlements, reached the same week, point in the same direction. When Coinbase and Robinhood stop offering sports contracts rather than fight enforcement, they are making a calculation about expected legal costs against expected market access. The industry's willingness to negotiate exits, rather than hold positions, tells you something about the internal assessments being made by firms whose public posture has been more confident.