Sixth Circuit ruling triggers mass cease-and-desist in Ohio

Andromeda Morrison, interim executive director of the Ohio Casino Control Commission, signed cease-and-desist notices on October 8 addressed to ten prediction market operators — Underdog, Gemini Titan, Coinbase, ProphetX, Novig, Robinhood Derivatives, Polymarket's U.S. entity, Plus500US Financial Services, Moomoo Financial, and Webull Financial. Each company has until October 16 to confirm it has stopped offering sports event contracts to Ohio residents. None holds an Ohio gaming license. The commission's position is that without one, they are running illegal gambling operations.

The legal foundation is the September 25 ruling by the Sixth Circuit in KalshiEx LLC v. Schuler. Circuit Judge Julia Smith Gibbons wrote that the Commodity Exchange Act does not expressly preempt Ohio's sports-betting laws because those laws "do not directly regulate" designated contract markets but have only incidental effects on them. Kalshi had argued its contracts are swaps, federally regulated instruments sitting outside state gambling authority. The panel found Kalshi had not demonstrated that, and Gibbons was pointed about why: she could not identify how pricing the probability of corner kicks in a soccer match, or whether a thirty-leg parlay hits, serves the Commodity Exchange Act's core purpose of managing commercial risk and establishing prices.

The Illinois outcome ran the other direction. Judge Martha Pacold in Chicago found Kalshi's contracts were likely swaps and that parts of Illinois gaming law were probably preempted. Two federal courts, one legal question, opposite answers. That split is now the dominant structural fact in this industry, and the Supreme Court petition already filed makes the timeline for resolution shorter than most operators are pricing.

Here is where I part company with the prevailing read. The market consensus treats the Illinois ruling as the more significant data point — a federal judge using swap logic to hold state authority at bay. I think that gets the weight wrong. The Sixth Circuit covers six states. Morrison's action against ten companies in a single week shows how quickly a favorable appellate ruling converts into enforcement posture. The Illinois ruling is a district court finding; it will be tested on appeal in the Seventh Circuit. The Sixth Circuit ruling already is the appellate record. Operators building national distribution on the assumption that federal preemption holds are carrying more state-level enforcement risk than their current compliance frameworks reflect.

The consumer protection argument Morrison deployed — that sports event contracts are available at eighteen while Ohio's legal sports betting age is twenty-one — is not going away regardless of how the swap question resolves. Even if a higher court ultimately finds federal preemption, legislatures can close the age gap. That is a separate track, and it runs slower but more reliably than litigation.

Kalshi itself was not among the ten companies served, almost certainly because Ohio's existing litigation against it makes a separate cease-and-desist redundant. That distinction matters less than it appears. The companies that were served include some of the largest names in adjacent financial services. If even two of them comply by October 16 and exit Ohio sports contracts, the commercial signal to the rest of the industry is louder than any court filing.