Sixth Circuit Rules 3-0 That Ohio and Tennessee Can Enforce Gambling Law Against Kalshi

A unanimous panel has held that Kalshi's sports contracts are not swaps, and that federal commodities law would not shield them from state gambling law even if they were. It is the second federal appeals court in a month to side with the states, leaving Kalshi with one win in three circuits as the Supreme Court weighs whether to take the question.

• The US Court of Appeals for the Sixth Circuit ruled unanimously on 25 September that Kalshi is unlikely to succeed in arguing that federal law shields its sports event contracts from the gambling laws of Ohio and Tennessee
• Judge Julia Smith Gibbons, writing for a panel with Judges Eric Clay and Rachel Bloomekatz, held that the contracts are not swaps because a sporting result does not inherently carry a financial consequence, noting that Kalshi had once conceded they have "no inherent economic significance"
• In an alternative holding, the court said that even if the contracts were swaps, the Commodity Exchange Act would not preempt the states' laws expressly, by occupying the field or by conflict
• The court affirmed an Ohio federal judge's refusal to protect Kalshi and vacated the preliminary injunction a Tennessee federal judge had granted it, which Tennessee's attorney general says lifts the order that blocked enforcement against the company
• The ruling lines up with the Ninth Circuit's August decision for Nevada and against the Third Circuit's 2-1 ruling for Kalshi in New Jersey, which New Jersey has asked the Supreme Court to review

Two States, One Opinion and No Dissent

The Sixth Circuit, sitting in Cincinnati, decided two appeals together on Friday 25 September: KalshiEX LLC v. Schuler, from the Southern District of Ohio, and KalshiEX LLC v. Orgel, from the Middle District of Tennessee, Nos. 26-3196 and 26-5235. Judge Julia Smith Gibbons wrote for a panel with Judges Eric L. Clay and Rachel S. Bloomekatz, which heard argument on 30 July; the opinion is recommended for publication, and no judge wrote separately. The district courts had divided. Judge Sarah Daggett Morrison in Columbus refused Kalshi a preliminary injunction against the Ohio Casino Control Commission (OCCC) and Attorney General Dave Yost, while Judge Aleta Arthur Trauger in Nashville granted one against officials of the Tennessee Sports Wagering Council (TSWC) and Attorney General Jonathan Skrmetti, finding the contracts were swaps and Tennessee law conflict-preempted. The Sixth Circuit affirmed in Ohio, vacated in Tennessee and remanded both.

The opinion records that Kalshi self-certified sports contracts on 22 January 2025, that both regulators sent it cease-and-desist letters, and that "Kalshi does not currently comply with either State's gaming laws." A motions panel had already refused Kalshi an injunction pending appeal in April, finding that it had shown "at most only that the merits [were] in equipoise".

The Swap Question: The Event Must Carry Its Own Consequence

The central holding turns on the part of the Act's swap definition that covers a contract whose payment depends on an event "associated with a potential financial, economic, or commercial consequence". The panel read that to require an event that inherently has such a consequence, such as a rise in interest rates or a debt default. Kalshi, relying on the Third Circuit, argued that sporting results matter financially to sponsors, advertisers, broadcasters and local economies. The court said those effects are "too attenuated, indirect, and speculative" because they depend on downstream actions. It cited Kalshi's concession in earlier litigation that the contracts have "no inherent economic significance", and the CFTC's own 2024 view that such contracts lack an underlying cash market. "There is no conceivable reason why the market might need to know the probability that a broadcaster says a random word on air," Gibbons wrote.

It also rejected a newer argument, that the CFTC's exclusive jurisdiction reaches any "account" or "agreement" on a registered exchange whether or not it is a swap, and said Kalshi's reading would "attach criminal penalties to a breathtaking amount of commonplace [gambling] activity", since swaps must generally trade on regulated venues.

Even as Swaps, the Court Said, State Law Would Survive

Assuming the contracts were swaps, the panel found no preemption. The words "exclusive jurisdiction" are not how Congress preempts state law, it said, pointing out that the same Act elsewhere says in terms that it shall "supersede and preempt" state gaming laws. It read the provision as displacing state enforcement aimed at the licensing and operation of designated contract markets (DCMs), not laws that only incidentally burden them. Unlike the Ninth Circuit, which declined to apply any presumption against preemption, the Sixth held that the presumption applies "with particular force" to gambling, a field states have long regulated. Field preemption failed on the Act's savings clauses. On conflict, the CFTC's impartial-access rules concern economic rather than geographic access, other exchanges have geofenced, and "expensive does not mean impossible". The Special Rule, which lets the CFTC bar event contracts involving gaming or unlawful activity, is "a backstop", the court said, that contemplates a role for state law.

Skrmetti called the ruling "a great win for Tennessee", saying Kalshi "attempted an end run around Tennessee law to avoid any of the rules or taxes associated with sports gambling. They failed." Kalshi spokesperson Dani Lever told The Block the company disagreed and did not believe the decision would survive further review, arguing that "Markets can't operate when the rules change at every state line, which is why Congress created a single federal regulator with nationwide rules."

The Count Is Two Circuits to One, and the Reasoning Is Converging

The Third Circuit's April ruling for Kalshi rested on the idea that sport has financial consequences for a broad ecosystem of stakeholders. The Sixth has now rejected that reasoning by name, as the Ninth did in August, which makes the states' reading look less like one court's view and more like the emerging majority. The Fourth Circuit has had Maryland's appeal since August 2025, and cases are pending in the Second, Seventh, Eighth and Tenth. At the Supreme Court, Kalshi's response to New Jersey's petition, No. 26-299, is now due on 9 November after an extension granted on 22 September, and Nevada's responses to the petitions from Robinhood and Crypto.com are due on 14 and 15 October. Kalshi could ask the full Sixth Circuit to rehear the case, as it has in the Ninth; that would buy time, not change the count.

Michigan and Kentucky Inherit the Rule

A published opinion binds later panels of the Sixth Circuit, which also covers Michigan and Kentucky. Michigan's appeals involving Robinhood, QCX and Kalshi are before the same court, and Robinhood stopped offering sports contracts in Michigan until it rules. InGame reports that the decision should make it easier for Ohio, Tennessee and Kentucky to move against sports contracts. The ruling is a preliminary one, but for operators the practical point is that customers in four states now fall under a binding appellate reading that Kalshi's model, federal registration in place of a state licence, is unlikely to protect it there.

The CFTC's Gaming Rule Is the Next Battleground

Both the Sixth and Ninth Circuits leaned partly on the CFTC's own rule on gaming contracts, 17 C.F.R. § 40.11: the Sixth read the underlying Special Rule as a backstop to state law, and the Ninth cited the rule's prohibition on listing gaming-related transactions. The CFTC is rewriting it. A proposal published in June would define "gaming" and set factors for public-interest determinations, and in a Ninth Circuit filing on 24 September in its case against Arizona, the agency said it "expects that its revised version of 17 C.F.R. § 40.11 will become final within the next two months", citing the Nevada panel's reliance on the current rule. A final rule could give Kalshi new material for the Supreme Court, but it cannot reach the Sixth Circuit's primary holding, which rests on the statute's definition of a swap.

Kalshi has now lost the same question in two of the three federal appeals courts to decide it, both times on the words of the statute. Its route to national sports contracts runs through a Supreme Court that would have to side with the minority circuit.