Sixth Circuit hands states a second win over Kalshi sports bets

Judge Julia Smith Gibbons had two ways to rule against Kalshi, and she used both of them.

The Sixth Circuit's unanimous opinion, handed down by a three-judge panel in Cincinnati, first found that Kalshi's sports-event contracts do not meet the statutory definition of a swap under the Commodity Exchange Act. Then, in the alternative, it found that even if they did qualify as swaps, the CEA would still not preempt Ohio and Tennessee gambling law. Two independent grounds, one outcome: states may regulate these contracts under their own gambling statutes.

Gibbons was direct about the underlying logic. Swaps exist to hedge financial risk — they reference rates, indices, instruments. Working out the probability that a soccer match produces a certain number of corner kicks, or that a thirty-leg parlay connects, does not serve that function. Gambling regulation, she wrote, lies at the heart of state police power, and Congress has consistently left states as the primary authority on what forms of gambling may operate within their borders.

The practical consequence is that Tennessee's preliminary injunction — which had blocked state enforcement against Kalshi — is now vacated. Ohio's denial of a similar injunction is upheld. Kalshi is exposed in both states.

What makes this more than a pair of state losses is the circuit map. The Ninth Circuit has already ruled that Nevada can treat Kalshi's contracts as gambling. The Sixth has now reached the same conclusion for Ohio and Tennessee. The Third Circuit went the other way in April, finding that Kalshi's contracts fell within CFTC exclusive jurisdiction, which prompted New Jersey to petition the Supreme Court. Three circuits, two conflicting answers, and the question of whether the Court intervenes now or waits for the map to fill in further is genuinely open.

I have watched Kalshi's legal team make this argument across multiple jurisdictions, and the swap framing has always been the thinner of their two claims. The preemption argument — that the CEA simply crowds out state authority wherever it operates — was always the one worth watching. Gibbons addressed it as a secondary holding, which means it carries less precedential weight on its own, but it is still a circuit court telling Kalshi that preemption does not save them even when the swap question is assumed in their favour. That is a more damaging ruling than the headline loss rate suggests.

The Supreme Court now faces a circuit split with a clear geography. Sports-contract prediction markets are lawful federal derivatives in the Third Circuit's territory and regulated gambling in the Sixth and Ninth. An operator cannot function coherently under that map, which is precisely the kind of conflict the Court exists to resolve. Whether the justices take New Jersey's petition, wait for Kalshi to file its own, or let further appellate decisions accumulate before granting certiorari is the question that now governs Kalshi's medium-term position in the United States market.