Sixth Circuit Rules Unanimously: Kalshi Sports Contracts Not Futures Exchanges, State Gambling Laws Apply in Ohio and Tennessee
The U.S. Sixth Circuit Court of Appeals ruled unanimously on Friday that sports contracts offered by prediction market platform Kalshi do not meet the definition of futures exchanges, allowing gambling laws in Ohio and Tennessee to apply. This decision solidifies Kalshi’s losses in both states and signals a growing jurisdictional battle over prediction markets that is now heading toward the Supreme Court.
The three-judge panel on the Sixth Circuit found that Kalshi failed to adequately demonstrate that its sports event contracts fit the definition of an “exchange” under the Commodity Exchange Act. The Act defines an exchange as pertaining to events with “potential financial, economic, or commercial consequences.” The court interpreted this to include only events inherently carrying financial ramifications, such as interest rate hikes or debt defaults. The impact of sporting events on sponsors, advertisers, and local businesses, the court argued, was “too indirect, too vague, and too speculative” to qualify.
The ruling upholds a March decision by Ohio Chief Judge Sarah D. Morrison, which denied Kalshi’s request for a preliminary injunction. Simultaneously, it overturns a February injunction granted to Kalshi by Tennessee Chief Judge Aleta A. Trauger, remanding the case to the district court.
Kalshi began listing sports event contracts in January 2025. The Ohio Casino Control Commission demanded the platform cease operations without a license, prompting Kalshi to file a lawsuit. In January, Tennessee’s Sports Gambling Committee also issued an order, adding Polymarket and Crypto.com’s Nadex to a watchlist.
Dani Lever, a spokesperson for Kalshi, told Courthouse News that the company disagrees with the ruling, stating, “The law does not require exchanges to have ‘inherent’ financial consequences, and even if it did, sports clearly do.”
Lever added that the decision highlights how “fragmented rules between states do not work… markets cannot function when rules change at every state border, which is why Congress created a single federal regulator to set nationwide rules.”
The core of the dispute lies in the Dodd-Frank Act’s definition of an exchange as encompassing contracts related to events with “potential financial, economic, or commercial consequences.” The court found the impact of sporting events too indirect, deeming even Kalshi’s “mention markets” insufficient.
Judge Julia Smith Gibbons wrote in the opinion, “It is not conceivable that a market would need to know the probability of a random word being spoken by a broadcaster on television.”
The ruling points out that Kalshi itself acknowledged in earlier litigation that its sports contracts “lack inherent economic significance.” A biography of former CFTC Chairman Gary Gensler’s associate mentions that Kalshi’s interpretation would lead to “vast amounts of ordinary gambling activity” being subject to criminal penalties, including “all sports wagers made in casinos, on online sports betting platforms, or among friends at a bar.”
As of the end of September, over a dozen states have initiated lawsuits or enforcement actions against Kalshi. New Jersey won a Third Circuit ruling in April, Ohio and Tennessee secured Sixth Circuit victories in September, and Nevada won a Ninth Circuit ruling in August. Kalshi’s record across three circuit courts stands at one win and three losses.
New Jersey Attorney General Jennifer Davenport formally requested the U.S. Supreme Court to review the Third Circuit’s decision on September 2. A ruling from Maryland’s Fourth Circuit Court of Appeals is still pending.
Kalshi’s data indicates that trading volume reached $38.67 billion in August, underscoring the rapid expansion of prediction markets.
This latest ruling signifies that the jurisdictional war over prediction markets is advancing to the Supreme Court. With New Jersey, Ohio, and Tennessee having secured victories in different circuit courts, the Supreme Court’s final decision will shape the regulatory landscape for prediction markets nationwide. A Kalshi victory would place sports contracts on prediction markets under unified CFTC jurisdiction, while a win for the states could necessitate state-by-state licensing for prediction markets.
