Kalshi’s nationwide pitch is that it is not a sportsbook but a federally licensed derivatives exchange, and that a federal statute gives the CFTC exclusive jurisdiction over what it sells. On Friday the Sixth Circuit said no on both halves of that argument, in a unanimous published opinion that affirms Ohio’s position, reverses Tennessee’s, and adds a third appellate court to a split that the Supreme Court has already been asked to resolve.
The case is KalshiEX LLC v. Schuler (Ohio) and KalshiEX v. Orgel (Tennessee), Nos. 26-3196/5235, decided 25 September. Judges Eric Clay, Julia Smith Gibbons and Rachel Bloomekatz heard argument on 30 July. The appeals were consolidated because they cut opposite ways below: the Southern District of Ohio refused to enjoin enforcement against Kalshi, while the Middle District of Tennessee granted an injunction on the theory that these contracts are swaps and that conflict preemption applies. The Sixth Circuit affirmed Ohio, vacated Tennessee, and remanded.
Two holdings, either one enough
The court resolved the swap question first, because the CEA’s “exclusive jurisdiction” grant reaches “accounts, agreements . . . and transactions involving swaps.” The operative definition, 7 U.S.C. § 1a(47)(A)(ii), has three parts: an agreement or transaction for purchase, sale, payment or delivery, whose value depends on the occurrence or nonoccurrence of an “event” that is “associated with a potential financial, economic, or commercial consequence.”
Kalshi conceded the first part. The panel agreed the contracts depend on “events” — and rejected the states’ attempt to distinguish an event’s occurrence from its outcome, noting that dictionaries define “event” to include outcomes, and that nothing in the text supplies the narrower reading Ohio and Tennessee wanted. Instead the limiting work was done by the third clause. An event must be intrinsically associated with a financial consequence, the panel held — such that it makes sense to want to hedge the risk of it happening or to price information about it. A change in interest rates qualifies. A soccer match does not.
“Unlike contracts based on financial values or instruments (e.g., interest rates or stock prices), Kalshi’s sports-event contracts have only downstream economic consequences, assuming they have the potential to cause economic consequences at all.”
The court’s concern about the alternative was explicit. Because the CEA makes off-exchange swaps unlawful under 7 U.S.C. § 2(e), a broad reading of “swap” would place a felony charge on “every sports wager placed in a casino, on an online sports book, or between two friends at a bar” — and, as the panel noted, on casino games and charity raffles too. The Ninth Circuit made the same observation in August. Kalshi’s answer, that only tradable instruments must sit on a designated contract market, was rejected: the statute’s definition “does not depend on the venue,” the court said. The instrument’s terms decide what it is.
Preemption fails even if the contracts were swaps
The second holding is a floor beneath the first. Even assuming the contracts qualify as swaps, the panel found nothing in the CEA that preempts Ohio’s or Tennessee’s gambling statutes.
Two savings clauses in § 2(a)(1)(A) do the work: the “exclusive jurisdiction” grant does not “supersede or limit the jurisdiction” of other state or federal regulators, and does not restrict them from carrying out their duties under those laws. The court also read the Dodd-Frank “Special Rule” against Kalshi. That provision lets the CFTC prohibit event contracts involving terrorism, assassination, war, gaming, or “activity that is unlawful under Federal or State law.” Kalshi argued this gave the CFTC the sole authority to decide whether gaming contracts may trade. The panel read it as a backstop instead — and drew an inference from its text that matters operationally: since the rule tells the CFTC to consult state law, it presupposes that certain event contracts may be listed in some states and not others. Obstacle preemption failed the same way, against the “high threshold” set in Chamber of Commerce v. Whiting.
Where the cost of that ruling falls is the point the states have been making all along. “Gambling regulation lies at the heart of the state’s police power,” the panel wrote, and federal law has generally “deferred to, and even promoted, differing gambling policies in different States.”
What the states were actually doing
Ohio’s Casino Control Commission sent Kalshi a cease-and-desist letter in 2025 calling its “unlicensed and unlawful offering of sports gaming” to people under twenty-one “a flagrant disregard of Ohio’s statutory gambling age limit.” The commission also warned licensed sportsbooks that offering or facilitating unlicensed sports gaming would call into question “the reputation of the licensee and the integrity of sports gaming in Ohio,” and that it would consider administrative action against any licensee that associated with an operator it deemed illegal. In April the OCCC issued a notice of intent to fine Kalshi $5 million. Kalshi’s response to the letter was that as “a federally licensed exchange . . . authorized to operate its market in all 50 states,” it could not “be regulated by Ohio or any other state.”
Tennessee requires its sports bettors to be twenty-one and physically located in the state. Ohio requires wagers to be initiated, received and completed in Ohio. Neither is exotic; both are the ordinary machinery of a legal market, including licensing, tax obligations and consumer-protection rules that Kalshi does not currently meet in either state.
One practical point in the opinion bears on how the industry has argued impossibility. Other companies, the court noted, comply with both the federal impartial-access requirement and state gaming laws by geofencing a market to one state’s participants. Kalshi called geofencing “technically challenging, time-consuming, and expensive.” The panel’s reply: “expensive does not mean impossible.”
The split, and what this does not decide
Three circuits now disagree. The Third Circuit held in April that these contracts likely are swaps and that the CFTC’s authority preempts state gambling law. The Ninth Circuit has ruled against Kalshi twice — in August on Nevada’s gambling statutes, and in September on tribal lands under the Indian Gaming Regulatory Act. New Jersey has petitioned the Supreme Court to sort it out.
Two limits are worth keeping in view. This is a preliminary-injunction decision: the Sixth Circuit decided Kalshi had not shown a likelihood of success on the merits, so it did not reach irreparable harm, the balance of equities, or the public interest. And the opinion is careful about the statute’s own terms — it expressly declined to hold that event contracts on elections or other non-financial subjects must fall outside the CEA. What it held is narrower and, for Kalshi’s business model, more expensive: the events it sells are the kind that carry only downstream economic consequences, and that is not what the swap definition describes.