Federal appeals courts split on Kalshi sports contracts

Two federal circuit courts have now looked at the same question — whether Kalshi's event contracts on sporting outcomes qualify as swaps under the Commodity Exchange Act — and reached opposite conclusions. That is not a routine disagreement. A circuit split on a jurisdictional question of this kind is the mechanism by which cases reach the Supreme Court, and Bill Miller said from the G2E stage this week that he believes that is exactly where this is headed.

The Sixth Circuit's ruling in Tennessee's favour reversed a lower court that had sided with Kalshi. The court found that a standard sports contest does not carry the financial, economic, or commercial consequence that the CEA requires a swap to carry. The D.C. Circuit reached a different result on materially similar facts. Both courts were applying the same statutory language. They are not both right.

The CFTC's response to those two defeats — and one of them is a defeat regardless of how the commission frames it — was to send two rulemakings to the White House Office of Information and Regulatory Affairs. One would expand the swap definition to pull event contracts inside it. The other would carve gaming-style products out of swap eligibility entirely, which would bar Designated Contract Markets from listing contracts on products like blackjack and craps. The two proposals are in tension with each other in ways that the commission has not yet had to resolve in public, because OIRA review precedes that reckoning.

What the CFTC is attempting is administrative consolidation of a legal question that courts have refused to settle cleanly. I have watched regulators try this before: when litigation produces inconvenient ambiguity, the agency writes the ambiguity away. The problem is that rulemaking authority does not cure a circuit split. The Sixth Circuit did not rule that the CFTC had failed to write the right rule. It ruled on the statute. A new rule does not reach back and answer what the statute meant.

The states understand this, which is why the AGA and the Indian Gaming Association have stopped treating the CFTC as the primary arena. Miller's language at G2E — keeping a foot on a throat — is the language of someone who believes the momentum is structural, not transactional. The tribal operators in California and Texas are not waiting for federal rulemaking to resolve their competitive exposure. They are litigating, lobbying, and building the legislative record that a Supreme Court majority would need to rule in their direction.

The circuit split is now the operative legal fact. Whether the CFTC's proposed rules survive OIRA review, and whether they then survive the administrative record challenge that Kalshi would file within weeks of publication, depends on whether the commission can demonstrate that it has statutory authority to define a term that two circuit courts have already disagreed about interpreting.