The Sixth US Circuit Court of Appeals in Cincinnati ruled on September 25 that Ohio and Tennessee can regulate Kalshi’s sports event contracts under their gambling laws, vacating a preliminary injunction that had blocked Tennessee from enforcing its statute and upholding a lower court’s denial of a similar injunction sought against Ohio. The decision deals a setback to Kalshi’s core legal argument that its products fall under exclusive federal oversight, and it deepens a growing split among federal appeals courts over state versus federal authority in the prediction-markets sector.
Kalshi lets users buy and sell so-called event contracts tied to outcomes ranging from sports and elections to weather and cultural events such as the Oscars. The company argued its sports contracts qualify as swaps under the Commodity Exchange Act, placing them under the exclusive jurisdiction of the CFTC and beyond the reach of state gambling regulators.
Circuit Judge Julia Smith Gibbons, writing for a unanimous three-judge panel, rejected that framing, holding that Kalshi’s sports event contracts are not “swaps” subject to exclusive CFTC oversight, and that the Commodity Exchange Act does not preempt Ohio’s or Tennessee’s gambling statutes.
Police Power Over Prediction Markets
Gibbons said swaps generally refer to financial instruments people use to hedge risk or gather pricing information, not gaming-related products. Gambling regulation, she wrote, “lies at the heart of the state’s police power,” and Congress has left states with primary responsibility for deciding what forms of gambling can occur within their borders.
The panel added that the Commodity Exchange Act’s core purpose is to help manage risk and generate pricing information, and questioned how determining the probability of corner kicks in a soccer match, or whether a 30-leg parlay hits, would serve those goals. Judges Eric Clay and Rachel Bloomekatz joined Gibbons on the panel.
A Widening Circuit Split
Friday’s ruling puts the Sixth Circuit alongside the Ninth Circuit, which found last month that Kalshi’s contracts are subject to Nevada’s gambling laws, while the Third Circuit ruled in April that Kalshi’s contracts are not subject to New Jersey’s gambling laws. New Jersey has already asked the Supreme Court to overturn the Third Circuit decision, and the fresh conflict raises the odds the justices eventually take up the question nationwide.
Kalshi said it does not expect Friday’s decision to survive further legal review. “The ruling shows exactly why a state-by-state patchwork doesn’t work,” spokesperson Dani Lever said, arguing that Congress created a single federal regulator with nationwide rules precisely because markets cannot operate when rules change at every state line.
Tennessee Attorney General Jonathan Skrmetti called the ruling a great win for his state, saying sports wagering is heavily regulated because it can cause harm and that Tennessee had thwarted Kalshi’s effort to strip away safeguards for bettors. The Ohio attorney general’s office had not responded to requests for comment at the time of the ruling. Many states, including Ohio and Tennessee, have moved to crack down on prediction-market operators such as Kalshi and Polymarket.
Source: Reuters, published September 25, 2026.
Renata Kovacs has spent the better part of a decade following the regulatory shifts and licensing battles that define how gambling markets open, close, and evolve across Europe and beyond. She came up through the legal and compliance side of the industry before shifting her focus to journalism and analysis, giving her a perspective that sits closer to the operator room than the press box. Her coverage tends to cut through the noise and get straight to what a regulatory change actually means for the businesses and players involved.