Sixth Circuit Court Decision on Kalshi's Contracts
By Nikhilesh De|Edited by Cheyenne LigonSep 25, 2026, 5:17 p.m. EDT2 min read
Make preferred on ShareShare this articleCopy linkX (Twitter)LinkedInFacebookEmailMake preferred on Kalshi co-founder and CEO Tarek Mansour (Jesse Hamilton/CoinDesk)
The Sixth Circuit Court of Appeals has ruled that Kalshi's contracts linked to sports events do not meet the criteria of swaps, thus placing them under the jurisdiction of state gaming laws instead of federal regulations from the Commodity Futures Trading Commission.
This decision marks another chapter in the ongoing legal tussle between states and prediction market operators, potentially paving the way for the U.S. Supreme Court to address the issue.
The appeals court's ruling stems from two separate lawsuits initiated by Kalshi against regulators in Ohio and Tennessee. Kalshi sought to prevent these states from pursuing legal action against it. While a federal court in Ohio rejected Kalshi’s request, a federal court in Tennessee approved it.
States have been attempting to regulate prediction markets that offer sports-related contracts, asserting that they compete directly with state-sanctioned gambling platforms. Many states argue that federally regulated entities do not contribute to state tax revenues while still competing with state-regulated options. Additionally, another concern is that prediction markets often allow participation from individuals aged 18, unlike most state gambling establishments which require participants to be at least 21.
In its ruling, the three-judge panel acknowledged Kalshi's right to file a case, but disagreed with the assertion that its contracts should be classified as federally regulated swaps.
"While we agree with Kalshi that its sports-event contracts are conditioned on the occurrence of 'event[s],' we conclude that Kalshi’s contracts do not depend on events that are 'associated with a potential financial, economic, or commercial consequence' within the meaning of the statute," the ruling stated.
The ruling cited the example of the New York Giants winning a Super Bowl, explaining that the outcome could be interpreted differently depending on how the "event" is defined. If the event refers to the Giants' victory, then it would be seen as "that event having occurred." Conversely, if the event refers to the game itself, then the outcome would be the Giants winning.
"The proper terminology, then, seems to turn on how the event itself is defined," the ruling observed. "And because nothing in the statutory text provides a clear indication that the event must be defined to exclude outcomes, we decline to read such a limitation into the statutory definition ourselves."
This ruling adds to a growing body of case law, as the Third Circuit previously determined that the CFTC has jurisdiction over prediction markets, while the Eighth Circuit concluded that sports-related contracts do not qualify as swaps. This divergence in circuit decisions may prompt the Supreme Court to take up the matter, especially since the Third Circuit's decision has already been appealed to the high court.
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