Kalshi took another legal loss Friday when the 6th US Circuit Court of Appeals ruled the prediction market platform hasn’t adequately demonstrated that its sports-event contracts qualify as swaps under the Commodity Exchange Act. The decision sides with Ohio and Tennessee, affirming that state regulators can apply their own sports-betting laws to Kalshi’s products.
The ruling marks the latest setback in Kalshi’s long fight to operate sports prediction markets without tripping state gambling statutes. Kalshi’s entire pitch rests on the argument that its contracts are federally regulated derivatives, not state-level wagers. The 6th Circuit didn’t buy it. Without a clear showing that the contracts meet the swap definition, the platform can’t preempt state law.
Circuit Split Widens, Supreme Court Path Opens
This decision doesn’t exist in a vacuum. The appeals court explicitly widened an existing circuit split, meaning other federal circuits have reached different conclusions on similar questions. That divergence is precisely the kind of mess the Supreme Court steps in to resolve. Kalshi now has a plausible path to petition the high court, though there’s no guarantee the justices will take the case.
The practical effect is immediate. Kalshi can’t launch sports contracts in Ohio or Tennessee under this framework, and the opinion gives ammunition to regulators in other states eyeing their own restrictions. Prediction markets have spent the past two years navigating a patchwork of enforcement actions, CFTC guidance, and state pushback. This ruling tightens the screws.
Kalshi’s Swap Theory Fails Again
Kalshi’s core legal strategy has been to treat event contracts as swaps, which fall under CFTC jurisdiction and theoretically bypass state gambling laws. The 6th Circuit wasn’t persuaded. The opinion suggests Kalshi didn’t meet its evidentiary burden to prove the contracts fit the statutory definition. That’s a narrow procedural loss, but it carries weight. If the platform can’t clear that bar in court, it can’t preempt state regulation.
The decision leaves Kalshi in a bind. The company can continue offering non-sports markets, where regulatory pressure is lighter, or it can double down on the Supreme Court route. Either way, the vision of a fully operational US sports prediction market just got harder to execute. Other platforms watching this case, Polymarket, for one, now have a clearer picture of the legal minefield ahead.
