Sixth Circuit Rules Kalshi Sports Contracts Aren't Swaps, Fuels Circuit Split
The Sixth Circuit decided Kalshi's sports-event contracts are not swaps under federal law.
Why it matters: This ruling complicates compliance for legal and financial professionals working with derivative-like sports contracts and state gambling laws across jurisdictions.
- On September 25, 2026, the Sixth Circuit ruled Kalshi's sports-event contracts are not swaps under the Commodity Exchange Act.
- The ruling allows Ohio and Tennessee to enforce their state gambling laws against Kalshi's contracts.
- The Sixth Circuit's decision deepens a federal circuit split on whether the CEA preempts state gambling laws for such contracts.
- Kalshi has been a registered designated contract market (DCM) with the CFTC since 2020 and began listing sports contracts in January 2025.
On September 25, 2026, the U.S. Court of Appeals for the Sixth Circuit unanimously ruled that KalshiEX LLC's sports-event contracts do not meet the statutory definition of "swaps" under the Commodity Exchange Act (CEA). This decision was articulated clearly in the court opinion: "We hold that Kalshi has not shown that its sports-event contracts satisfy the statutory definition of a 'swap' so as to fall within the scope of the CFTC's 'exclusive jurisdiction.'"
The impact of this ruling is significant. It affirms the authority of states like Ohio and Tennessee to apply their respective state gambling laws to Kalshi's sports contracts, effectively allowing state regulators to police these transactions. This has increased complexity for entities operating in multiple states with varying gambling regulations.
This decision intensifies an existing circuit split. Previously, the Third Circuit concluded that the CEA likely preempts state gambling laws when it comes to sports-event contracts, enabling federal regulatory oversight. Conversely, the Ninth Circuit agreed with the Sixth Circuit, holding that the CEA does not preempt state gaming regulations for such contracts. The Sixth Circuit's ruling further deepens this legal divide, creating uncertainty about federal versus state jurisdiction in this emerging market.
Kalshi, which has been registered as a designated contract market (DCM) with the Commodity Futures Trading Commission (CFTC) since 2020, began listing contracts based on sports outcomes in January 2025. The company marketed itself as "the first nationwide legal sports betting platform," asserting that "sports betting [is] legal in all 50 states on Kalshi."
This characterization is now under significant legal challenge. With two federal appellate courts—the Ninth and Sixth Circuits—rejecting Kalshi's classification of its contracts as swaps, the company faces intensifying regulatory scrutiny on multiple fronts.
Legal and financial professionals will need to monitor this evolving landscape closely as the interplay between federal commodities law and state gambling regulations continues to unfold across jurisdictions.
By the numbers:
- September 25, 2026 — Date of Sixth Circuit ruling against Kalshi
- 2020 — Year Kalshi registered as a designated contract market (DCM) with the CFTC
- January 2025 — When Kalshi began listing sports-event contracts
Yes, but: The Third Circuit’s opposing view raises the possibility that this split might be resolved by higher courts or future legislation, so regulatory uncertainty persists.
What's next: Potential appeals or Supreme Court review could clarify the legal status of sports-event contracts under the Commodity Exchange Act and resolve the circuit split.