The Sixth US Circuit Court of Appeals ruled on Friday 25 September that Ohio and Tennessee can regulate Kalshi‘s event contracts under their own gambling laws, rejecting the company’s bid to have the products treated exclusively as federally regulated swaps. The unanimous three-judge panel, based in Cincinnati, handed the prediction-market operator its second appellate loss in as many months.
Kalshi had argued that its event contracts, including sports-related offerings, are swaps under federal commodities law and therefore fall outside the reach of state gambling statutes. Circuit Judge Julia Smith Gibbons wrote the opinion for the panel, which found that Ohio and Tennessee retain authority to apply their gambling laws to the contracts regardless of how they’re classified federally.
A Widening Split Among the Circuits
Friday’s decision is the third time a federal appeals court has weighed in on whether prediction markets answer to state gambling regulators, federal commodities law, or both – and the answers haven’t matched. The Ninth Circuit in San Francisco ruled last month that Nevada’s gambling laws apply to Kalshi’s contracts, aligning with the Sixth Circuit’s outcome.
The Third Circuit in Philadelphia went the other way in April, finding that Kalshi’s contracts are not subject to New Jersey’s gambling laws. That leaves three circuits pointing in two different directions on the same basic question, which is exactly the kind of conflict that tends to draw the US Supreme Court’s attention – though nothing in Friday’s ruling guarantees the justices will take up the issue.
Kalshi Pushes Back
A Kalshi spokesperson disputed the ruling in comments reported by The Hill and CNBC, arguing the decision underscores why a state-by-state approach to prediction markets doesn’t work, since courts have reached opposite conclusions on whether federal law covers the contracts and whether sports carry genuine economic weight. The spokesperson said markets can’t function when rules shift at every state line, and pointed to Congress’s creation of a single federal regulator as the intended fix.
That response was directed at the Sixth Circuit’s decision specifically. Kalshi has made similar arguments in the Ohio, Tennessee and Nevada cases, framing state enforcement as fragmenting a market that federal law was designed to oversee nationally.
A Bigger Regulatory Fight
The ruling lands amid rapid growth in prediction markets, where users now bet on outcomes ranging from sporting events and elections to cultural developments and even the prospects of a US-Iran nuclear deal. That expansion has drawn scrutiny from experts worried about consumer protection and underage access, concerns that echo the CFTC’s ongoing framework for interpreting event contracts at the federal level.
Those tensions surfaced again this week when New York filed a lawsuit against rival platform Polymarket, alleging it operates as an unlicensed gambling business and arguing the platform poses risks to state residents, including minors. That case is separate from the Kalshi litigation but reflects the same underlying fight over who gets to police these products.
What Happens Next
With three circuits now split on whether federal commodities law preempts state gambling authority over event contracts, the door is open for the Supreme Court to eventually resolve the question. No petition has been confirmed as accepted, and it remains unclear whether the justices will step in now or wait for additional circuit rulings.
In the meantime, Kalshi faces a patchwork outcome: cleared to operate under federal oversight in New Jersey, but now subject to state gambling law in Ohio, Tennessee and Nevada. That inconsistency is likely to shape how the company structures its state-by-state operations until a higher court – or Congress – settles the matter.
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