Sixth Circuit Ruling Subjects Kalshi to State Enforcement

The Sixth Circuit Court of Appeals has ruled that Ohio and Tennessee regulators may pursue enforcement actions against Kalshi Inc. This decision affirms a lower court’s ruling in Ohio and vacates a prior injunction against Tennessee regulators.

What Happened

The Sixth Circuit Court of Appeals determined that regulators in Ohio and Tennessee are permitted to initiate enforcement against Kalshi Inc. concerning alleged violations of state sports gambling laws, according to Bloomberg Tax News. A three-judge panel was not convinced by Kalshi’s assertion that the federal Commodity Futures Trading Commission (CFTC) possesses sole regulatory authority over its operations and that federal law preempts state action.

Senior Judge Julia Smith Gibbons, joined by Judges Eric L. Clay and Rachel S. Bloomekatz, stated that Kalshi’s interpretation would grant the CFTC jurisdiction over event contracts that do not align with Congressional intent. This ruling upholds an Ohio federal judge’s denial of Kalshi’s request for a preliminary injunction to prevent punitive actions by Ohio regulators. It also vacates an injunction previously imposed against regulators in Tennessee, as reported by Bloomberg Tax News.

Key Details

• The Sixth Circuit ruled that state regulators in Ohio and Tennessee can pursue enforcement actions against Kalshi Inc. (Bloomberg Tax News).
• Kalshi’s argument for exclusive federal regulation by the Commodity Futures Trading Commission (CFTC) was rejected by the court (Bloomberg Tax News).
• The ruling affirms an Ohio federal judge’s decision to deny Kalshi a preliminary injunction and vacates a prior injunction against Tennessee regulators (Bloomberg Tax News).
• Kalshi is represented by Milbank LLP, Flannery Georgalis LLC, and Bass, Berry & Sims PLC (Bloomberg Tax News).

Why It Matters

The ruling contributes to an ongoing national legal dispute involving prediction market platforms, the US derivatives regulatory agency, states, and tribal entities regarding whether these platforms’ products are classified as gambling or swaps. Following the 2008 financial crisis, Congress granted the CFTC “exclusive jurisdiction” over swaps. The Commodity Exchange Act defines “swaps” as financial instruments linked to the occurrence or nonoccurrence of an event with a potential financial, economic, or commercial consequence.

Kalshi has contended that its “sports events contracts” meet this definition, while the states argue that such offerings constitute online gambling. Federal trial and appeals courts have demonstrated differing opinions on this issue; for instance, the Third Circuit reportedly ruled in favor of Kalshi in a comparable case, while the Ninth Circuit ruled against it, according to Bloomberg Tax News.

Originally reported by Bloomberg Tax News·Published 25 Sep 2026, 20:01