Sixth Circuit Rules States Can Regulate Kalshi’s Sports Event Contracts
The Sixth Circuit ruled states may regulate Kalshi’s sports event contracts, not the CFTC.
Why it matters: This decision amplifies a federal circuit split on regulation of prediction markets, complicating compliance for market operators and counsel. Understanding where authority lies is critical for navigating state and federal oversight risks.
- On September 25, 2026, the Sixth Circuit held Kalshi’s sports event contracts are not federally regulated swaps under the Commodity Exchange Act.
- States like Ohio and Tennessee may regulate such contracts under their gambling laws, per the ruling.
- This conflicts with the Third Circuit’s August 2026 ruling affirming the Commodity Futures Trading Commission (CFTC)’s exclusive jurisdiction over these derivatives.
- The Ninth Circuit also supported state gambling regulation in August 2026, deepening the circuit split over regulatory authority.
On September 25, 2026, the Sixth Circuit Court of Appeals ruled that contracts offered by Kalshi, a trading platform for event-based derivatives, are not "swaps" under the federal Commodity Exchange Act (CEA). This means they fall outside the Commodity Futures Trading Commission (CFTC)’s jurisdiction and may be regulated by individual states.
Specifically, the court ruled that states including Ohio and Tennessee can enforce their gambling statutes against Kalshi’s sports event prediction markets. These state laws address the platforms’ event contracts as forms of sports gambling, subject to local licensing and regulation.
Kalshi operates as a Designated Contract Market registered with the CFTC, offering customers contracts tied to specific event outcomes. The federal classification of these contracts—as either "swaps" or gambling instruments—has generated legal disputes focused on regulatory authority.
The Sixth Circuit’s ruling stands in direct opposition to an August 2026 decision by the Third Circuit, which upheld the CFTC’s exclusive authority over such instruments under the CEA. The Third Circuit characterized these contracts as swaps subject to federal oversight, limiting state regulatory power.
Complicating matters, the Ninth Circuit also sided with state regulation in August 2026, concluding that these prediction markets effectively constitute sports gambling under state law, thereby falling outside the federal swaps framework. These rulings create a pronounced circuit split on regulatory reach.
This legal division creates challenges for Kalshi and similar platforms, which must now navigate inconsistent enforcement approaches across jurisdictions. Market participants and their legal advisors must monitor these developments closely to manage compliance risks amid uncertain regulatory boundaries.
Because federal statutes like the Commodity Exchange Act provide varying definitions and delegate oversight authority differently across states, the Supreme Court may need to resolve this circuit split. Until then, operators face a complex patchwork of state and federal rules.
By the numbers:
- September 25, 2026 — Date of the Sixth Circuit ruling against CFTC jurisdiction
- August 2026 — Month the Third and Ninth Circuits issued conflicting rulings
- 3 — Number of federal appellate circuits prominently involved in the Kalshi regulatory dispute
Yes, but: The Sixth Circuit ruling rests on interpreting the Commodity Exchange Act narrowly, a position contested by the CFTC and other circuits, making the dispute unresolved until higher court review.
What's next: Expect potential Supreme Court consideration of the circuit split within the next 12-18 months, which could clarify regulatory authority over prediction markets.