Circuit Split Explodes: Kalshi Dealt Major Blow as 6th Circuit Backs State Gambling Laws

The 6th U.S. Circuit Court of Appeals in Cincinnati ruled on Friday that Ohio and Tennessee can regulate Kalshi's event contracts under their state gambling laws, handing the prediction-market operator a significant loss in its bid to keep the industry under exclusive federal oversight. The unanimous three-judge panel, led by Circuit Judge Julia Smith Gibbons, vacated a preliminary injunction that had blocked Tennessee's enforcement and upheld an Ohio judge's denial of a similar injunction.

The court held that Kalshi failed to demonstrate its sports event contracts qualify as swaps subject to exclusive Commodity Futures Trading Commission oversight, and that the Commodity Exchange Act does not preempt either state's gambling laws. Kalshi spokesperson Dani Lever criticized the outcome, saying, "The ruling shows exactly why a state-by-state patchwork doesn't work. Markets can't operate when the rules change at every state line, which is why Congress created a single federal regulator with nationwide rules." Tennessee Attorney General Jonathan Skrmetti praised the decision as a "great win" for his state, emphasizing that sports wagering is heavily regulated to prevent harm.

The ruling adds to a growing circuit split: the 9th Circuit recently found Kalshi's contracts fall under Nevada's gambling laws, while the 3rd Circuit reached the opposite conclusion for New Jersey in April. New Jersey has already asked the Supreme Court to overturn the 3rd Circuit's decision, and the 6th Circuit's contrary outcome strengthens the case for the justices to resolve which framework governs nationwide. Kalshi said it does not expect the decision to survive further legal review, signaling continued litigation. The broader tension between state gambling authority and federal commodities regulation now sits before three circuits with conflicting answers, increasing the potential for Supreme Court review.