The United States Court of Appeals for the Sixth Circuit has ruled that prediction market Kalshi’s sports event contracts are not determined as swaps under the Commodity Exchange Act (CEA).
The Sixth Circuit covers jurisdiction over federal district courts in Kentucky, Michigan, Ohio and Tennessee.
The ruling means that the CEA does not pre-empt Ohio and Tennessee gambling laws from regulating Kalshi’s sports event contracts – which comes following the Southern District of Ohio’s denial of a preliminary injunction and the Middle District of Tennessee’s entry of a preliminary injunction.
Kalshi began offering sports event contracts on its exchange in early 2025, which in turn drew the attention of state regulators, such as Tennessee and Ohio’s sports gambling regulators.
Subsequently, the Ohio Casino Control Commission (OCCC) and Tennessee Sports Wagering Council (TSWC) indicated that they would bring enforcement actions against Kalshi for offering these contracts, on the bases that these violate their respective state gambling laws.
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Explaining the ruling, the court states 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’.”
Disputing this, Kalshi has argued that since its contracts are classified as swaps, the Commodity Futures Trading Commission (CFTC) has ‘exclusive jurisdiction’ over them.
Specifically, to qualify as a swap under this, there must be a form of agreement which depends on an ‘occurrence,’ ‘non-occurrence,’ or ‘the extent of the occurrence’ of an ‘event’ that is ‘associated with a potential financial, economic, or commercial consequence’.
While the court agrees that Kalshi’s sports event contracts are conditioned on the occurrence of an event, it disputes that the firm’s contracts do not depend on events that are ‘associated with a potential financial, economic, or commercial consequence’, and do not constitute swaps under the CEA.
It also goes on to explain that these contracts are not associated with potential financial, economic and commercial consequences, since they only have downstream economic consequences.
Ultimately, the ruling means that Kalshi is unable to rely on the CEA to shield its sports event contracts from state gambling laws, with the Sixth Circuit affirming Ohio’s denial of an injunction and vacating the injunction issued in Tennessee.
The cases have now been remanded to the respective district courts for further proceedings.