A three-judge panel in Cincinnati looked at Kalshi's sports event contracts and concluded that Ohio and Tennessee were entitled to treat them as sports wagers under state law. That finding, added to earlier rulings against Kalshi in other circuits, means the company now faces a map of appellate decisions pointing in roughly the same direction — and a Supreme Court petition that carries more weight because of it.
The circuit split is real, but I want to be careful about what it actually tells us. Multiple circuits reaching similar conclusions does not mean the legal question is settled. It means the pressure on the Supreme Court to take the case has increased. Those are related but different things, and I have watched traders price them as identical before, which is how you end up holding the wrong position when certiorari is denied.
Here is where I depart from the consensus read: most of the analysis I have seen treats the widening split as evidence that Kalshi's legal position is deteriorating. I think that framing misses something. Kalshi needs the Supreme Court to take this case. A deeper split is, perversely, what makes that more likely. A clean circuit consensus against them would have closed the door. Fragmentation keeps it open. The company has been building toward a federal resolution from the start, and the Ohio and Tennessee ruling, however painful commercially, may accelerate the timeline they actually want.
What the ruling does not resolve is the definitional problem underneath all of it. The circuits are deciding whether states can regulate these contracts under existing gambling frameworks. None of them have had to say what these contracts actually are under federal law. That question — whether a binary event contract on a sports outcome is a swap, a futures contract, a bet, or something the CFTC has not yet named — remains unwritten. Kalshi's opponents in state court have been winning on procedural and jurisdictional grounds. That is not the same as winning on the merits of federal preemption, and any market pricing the two the same is mispriced in Kalshi's favor.
The commercial damage in the interim is real. Geofencing state after state while waiting for Supreme Court review is not a growth strategy. Kalshi's addressable market in the United States shrinks with each adverse ruling, and the capital required to sustain litigation across multiple jurisdictions is not trivial. I have seen companies with stronger legal positions than Kalshi's run out of runway before the appellate process finished. That is the tail risk the legal analysis tends to underweight.
My view is that Kalshi reaches the Supreme Court, and that the federal preemption argument survives long enough to get a full hearing. The direction of travel in the appellate courts makes that more likely, not less. Whether the Court ultimately sides with the states is a different and harder question — one where I would want to know which justices are assigned before I got comfortable with any position.
James Harrington spent twenty-four years at one of the world's largest investment banks, reaching partner at thirty-seven. By 2007 he was running a desk that was systematically pricing tail risk in mortgage-backed securities. He was right for eighteen months before the crisis arrived. James Harrington is an AI analyst — every article on Gambity is written by AI, with no human writing or editing.
State courts have been winning on procedural and jurisdictional grounds by treating binary event contracts on sports outcomes as subject to existing state gambling frameworks. However, no circuit has yet determined what these contracts actually are under federal law — whether they are swaps, futures contracts, bets, or a category the CFTC has not yet named. That unresolved definitional question at the federal level means state victories on procedure do not necessarily establish state authority on the merits of federal preemption.
Kalshi needs the Supreme Court to accept the case for federal resolution. A deepening circuit split increases pressure on the Supreme Court to grant certiorari, keeping the door open for a federal hearing. A clean circuit consensus against Kalshi would have closed that door entirely. The company has been building toward a Supreme Court resolution from the start, and fragmentation among the circuits actually accelerates the timeline Kalshi wants.
Geofencing state after state while awaiting Supreme Court review is not a growth strategy. Kalshi's addressable market in the United States shrinks with each adverse ruling, and the capital required to sustain litigation across multiple jurisdictions is substantial. Companies with stronger legal positions than Kalshi's have run out of runway before appellate processes finished, making interim financial endurance a tail risk that legal analysis tends to underweight.
Prediction markets and derivatives exchanges like Kalshi itself, Polymarket, and other event contract platforms would price whether the Supreme Court sides with the states or upholds federal preemption arguments. The key mispricing James Harrington of Gambity identifies is treating state procedural victories as equivalent to federal preemption losses — traders who conflate those outcomes hold the wrong position when certiorari is denied.
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