Sixth Circuit finds Kalshi sports contracts are not federal swaps

The opinion arrived on a Tuesday, unsigned until the final page, where Judge Julia Smith Gibbons put her name to a sentence that will follow Kalshi into whatever courtroom comes next. Sports-event contracts — the ones that let a user bet on corner kicks or a 30-leg parlay — do not satisfy the statutory definition of a swap under the Commodity Exchange Act. That is the Sixth Circuit's finding, unanimous, from a three-judge panel in Cincinnati.

It is a narrow holding and Kalshi's opponents will treat it as a broad one. Those are different problems.

The opinion runs two tracks. On the first: the contracts are not swaps, so CFTC exclusive jurisdiction never attaches, so Ohio and Tennessee can do what they want. On the second, and this is the track that carries the weight: even if the contracts were swaps, the CEA would not preempt state gambling law. Gibbons writes that gambling regulation lies at the heart of state police power, and that Congress allocated primary responsibility for that question to the states. Both holdings reach the same destination. The second one does it in a way that survives a reclassification of the product.

The coverage I have seen treats this as a clean loss for Kalshi. I am not sure that reading holds. The Sixth Circuit's preemption analysis is structurally identical to the Ninth Circuit's. But the Third Circuit, ruling in April, went the opposite direction and found CFTC jurisdiction exclusive. New Jersey has already petitioned the Supreme Court to take that case. Cincinnati has now made that petition more attractive, not less — three circuits have addressed the same statutory question and produced two different answers. That is precisely the condition under which certiorari becomes difficult to deny.

What Kalshi loses today is the injunction. The Tennessee district court had blocked state enforcement; that block is now vacated. Ohio's denial of a similar injunction is upheld. Enforcement, in both states, can proceed.

The market question that follows from this is not whether Kalshi survives — the company has run this circuit-split strategy deliberately and the Supreme Court petition was always the intended destination. The question is timing. Enforcement in Ohio and Tennessee is live before that petition resolves. The gap between a circuit split and a cert grant is measured in months at minimum, and operating under active state enforcement during that window is a different commercial reality than operating under an injunction.

Gibbons's observation that determining the probability of corner kicks in a soccer match would be difficult to reconcile with the purposes of the CEA's swap definition is, as a matter of statutory interpretation, the correct instinct. Swaps are instruments for hedging financial exposure. The definitional question is whether an event contract on an athletic outcome can be mapped onto that framework without distorting both. The Sixth Circuit concluded it cannot. The Third Circuit concluded it can. The Supreme Court will now have to decide which circuit read the statute correctly, and that decision will not turn on soccer.

The legal standard that governs from here is the one the Court will apply to the CEA's swap definition under Chevron's successor framework — textual, structural, historical. Whether Congress, when it wrote the Commodity Exchange Act, intended to occupy the field of state gambling regulation is a question the statutory text does not answer cleanly. Courts that have looked at it honestly have disagreed.