Kalshi's Sixth Circuit Appeal Denied, Increasing Supreme Court Review Likelihood

This ruling highlights the ongoing tension between state and federal regulations in the rapidly evolving landscape of prediction markets.

• On September 26, 2026, the Sixth Circuit Court of Appeals ruled against Kalshi, affirming state authority to regulate sports-event contracts.
• The court found that Kalshi's contracts do not qualify as "swaps" under federal law, allowing states like Ohio and Tennessee to enforce their gambling laws.
• This decision creates a circuit split, increasing the likelihood of a U.S. Supreme Court review following conflicting rulings from other circuits.

• Kalshi operates as a prediction market under CFTC registration, offering contracts tied to various outcomes, including sports.
• State regulators have increasingly asserted their authority over prediction markets, leading to legal battles over jurisdiction and regulatory oversight.
• Prior rulings have shown inconsistency across circuits, with the Third Circuit favoring Kalshi in New Jersey while the Ninth Circuit upheld state regulations in Nevada.

The recent ruling by the Sixth Circuit Court of Appeals against Kalshi is a significant development in the ongoing legal battle over prediction markets and their regulation. Kalshi, a platform that allows users to bet on the outcomes of various events, including sports, has been operating under the assumption that its contracts qualify as "swaps" and thus fall under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC). However, the Sixth Circuit unanimously ruled that Kalshi's contracts do not meet the definition of swaps as outlined in the Commodity Exchange Act.

This ruling is particularly important because it reinforces the authority of state regulators in Ohio and Tennessee to impose their gambling laws on prediction markets. The court's decision vacates a previous injunction that favored Kalshi in Tennessee and upholds the denial of relief in Ohio. This creates a patchwork of regulations across the United States, where different states can impose varying rules on prediction markets, leading to uncertainty for market participants.

The implications of this ruling extend beyond Kalshi itself. With the Third Circuit having previously ruled in favor of Kalshi in New Jersey, a circuit split has now emerged. This inconsistency among federal appellate courts raises the likelihood that the U.S. Supreme Court will take up the issue to provide clarity on whether federal law preempts state regulations in this context. Kalshi has expressed confidence that the decision will not withstand further review, highlighting the inefficiencies of a state-by-state regulatory approach.

As the legal landscape evolves, market participants face continued uncertainty. The outcome of potential Supreme Court intervention could reshape the regulatory framework for prediction markets, impacting how these platforms operate and how users engage with them. The stakes are high, as a ruling in favor of federal preemption could streamline regulations but also limit state authority, while a ruling against it would solidify state control and potentially stifle innovation in the prediction market space.

• Prediction market operators: Companies like Kalshi may face increased regulatory hurdles and operational challenges.
• Sports bettors: Individuals engaging in prediction markets could see changes in the availability and legality of betting options based on state regulations.
• State lawmakers: Legislators in states like Ohio and Tennessee may feel empowered to enforce stricter regulations on prediction markets.

• Supreme Court intervention: Watch for any petitions filed by Kalshi or other states seeking Supreme Court review, as this could set a precedent for future regulation.
• State legislative actions: Monitor how states respond to the ruling, particularly in terms of new regulations or legal challenges to prediction markets.
• Market participant reactions: Observe how prediction market operators adapt their business models in response to the evolving legal landscape.