Sixth Circuit ruling shifts legal ground as CFTC backs states

The Sixth Circuit Court of Appeals handed Tennessee a win last week that the American Gaming Association's Bill Miller may find more valuable than anything said on the main stage at the Venetian Expo. A lower court had sided with Kalshi. The appeals court reversed it. That is now two consecutive circuit-level losses for prediction markets, and the pattern is starting to look less like variance and more like a trend.

Miller used his G2E keynote to remind the room that Kalshi's own CEO once argued in federal court that offering sports bets at the federal level would be illegal. The company has since processed what Miller estimates at more than $190 billion in sports contracts. The gap between that 2024 position and the current volume is the core of the AGA's case, and it is not a weak one.

What I find underpriced in the current conversation is the significance of the CFTC's two rulemakings now sitting at the White House Office of Information and Regulatory Affairs. The reflex in this industry is to watch the courts, and the courts have been obliging. But the CFTC is attempting something courts cannot do cleanly: draw a definitional line between a swap and a bet by rewriting what a swap means. One proposal would extend the swap definition to cover event contracts. The other would explicitly exclude gaming-style products from DCM listings. If both clear White House review and survive the rulemaking process, Kalshi and Polymarket face a regulatory structure that does not depend on which circuit they draw.

The consensus view at G2E was that this fight ends at the Supreme Court. Miller said as much. I am less sure that is where the decisive blow lands. Rulemaking is slower than litigation, but a final CFTC rule carries a different kind of weight than a circuit split. A circuit split invites cert. A codified federal definition of what a swap is not gives the next court a different starting point entirely.

The casinos have made their position clear. MGM and Caesars have both ruled out entering the prediction market space, citing licence risk. Craig Billings at Wynn has taken a different posture. DraftKings, watching from the daily fantasy infrastructure it already owns, is positioned to move faster than any brick-and-mortar operator if the regulatory gap ever resolves in prediction markets' favour. That the incumbents are declining to compete is a strategic choice that DraftKings did not make, and the distance between those two decisions is widening every quarter.

The Indian Gaming Association joined the AGA on the opening panel, and California Nations chair James Siva noted that tribal operators remain the only licensed operators in California. Prediction markets have built their largest user bases in California and Texas — precisely the two states where the licensing structure gives tribes and established operators the strongest political argument for exclusion.

Two circuit losses, two CFTC proposals, and a unified industry front are not sufficient to resolve this. But they are sufficient to say the legal position of prediction markets at the start of October 2026 is materially weaker than it was at the start of the year, and the markets trading on the outcome have not fully absorbed what it means when the regulator stops defending you in court and starts writing rules against you instead.