Kalshi has spent months arguing that one federal regulator puts its sports contracts out of every state’s reach. On Friday a federal appeals court knocked that argument down, and then knocked it down a second time for good measure.
A unanimous three-judge panel of the Sixth Circuit said Kalshi hadn’t shown its sports contracts count as “swaps.” Swaps are the category of derivatives the Commodity Futures Trading Commission regulates exclusively. The judges then went further. Even if the contracts were swaps, they wrote, the Commodity Exchange Act doesn’t preempt Ohio’s or Tennessee’s gambling laws.
That second holding matters. It means Kalshi can’t win this fight just by winning the definitions argument.
Two states, one ruling
In practical terms, the decision cuts against Kalshi in both states. The court upheld an Ohio judge’s refusal to block that state’s regulators. It also vacated an injunction that had stopped Tennessee’s regulators from acting against Kalshi.
So Ohio’s regulators never lost their footing, and Tennessee’s just got theirs back.
A soccer club and a Knicks bar weren’t enough
The heart of Kalshi’s swap argument was statutory language. Its contracts qualify, Kalshi argued, because they turn on events “associated with a potential financial, economic, or commercial consequence.”
The judges didn’t buy that reading. They took the phrase to mean events tied to a financial consequence by their nature, and they said sports results aren’t that kind of event.
An industry group backing Kalshi tried to prove otherwise with real-world examples. It pointed to a Spanish soccer club hedging against relegation, and to a bar hedging a free-drinks promotion tied to the Knicks. The court called those “isolated examples” that were “a far cry from establishing that sports-event contracts are inherently associated with a financial consequence” or commonly used to hedge risk.
That’s a pointed dismissal. Two anecdotes don’t turn an entire product category into a hedging instrument, and the panel said as much.
Kalshi made its own problem, the court said
The opinion also took on the claim that state laws unfairly burden federally regulated exchanges. The court wrote that the laws’ effects on exchanges are limited. It added that exchanges feel those effects only because platforms like Kalshi chose to list contracts that “are virtually indistinguishable from” sports bets.
That phrase didn’t originate in the Sixth Circuit. The panel borrowed it from a dissent in the Third Circuit’s case, the one Kalshi won.
The scoreboard is now two to one
Count the appeals courts and the trend isn’t great for Kalshi. The Sixth Circuit is the second to side with the states. The Ninth Circuit ruled for Nevada on Aug. 28. The Third Circuit went the other way in April, siding with Kalshi against New Jersey.
One more decision is on the way. A Fourth Circuit appeal over Maryland is still pending, the opinion notes.
New Jersey isn’t waiting for that one. The state has already petitioned the Supreme Court to take up the question.
Kalshi’s response
Kalshi disagreed with the ruling. Spokesperson Dani Lever said in a statement that “the ruling shows exactly why a state-by-state patchwork doesn’t work.”
She has a point about the patchwork, but Kalshi is the one on the losing side of it. As things stand, the same contract can be protected in New Jersey and fair game for regulators in Ohio, Tennessee and Nevada. If you trade sports contracts on Kalshi, the state you live in now matters as much as the game you’re betting on, and it’ll keep mattering until the Supreme Court decides whether to step in.
