A federal appeals court has ruled against prediction market Kalshi, clearing the way for Ohio and Tennessee to enforce their gambling laws on sports-event contracts — and setting up a fight that could soon land on the Supreme Court’s doorstep.
By Raj Patel | September 26, 2026
The 6th US Circuit Court of Appeals ruled against Kalshi on Friday, when a three-judge panel unanimously sided with Ohio and Tennessee. The court found that Kalshi failed to demonstrate that its sports-event contracts are “swaps” under the jurisdiction of the Commodity Futures Trading Commission — the federal hook the company has used to argue that state gambling laws cannot touch it. For the millions of Americans who have started trading on prediction markets, the ruling is about a simple question: who decides what you can bet on — your state, or Washington?
The Hook: A Three-Way Circuit Split Nobody Can Ignore
Fridays ruling did not come out of nowhere. It follows a similar decision from the 9th Circuit Court of Appeals last month, which also allowed states to regulate Kalshi’s sports contracts. But in April, the 3rd Circuit Court of Appeals broke the other way, allowing Kalshi to keep doing business in New Jersey while its appeal proceeds, saying the company was likely to succeed on its argument that federal law preempts state regulation.
When two or more federal appeals courts read the same law in opposite ways, that is called a circuit split — and it is the single most common reason the Supreme Court agrees to take a case. Companies cannot operate under one set of rules in Tennessee and another in New Jersey forever. Something has to give, and only the Supreme Court can decide which interpretation wins nationally.
The Evidence: What the Courts Actually Said
- 6th Circuit, Friday — a unanimous three-judge panel ruled Ohio and Tennessee can regulate sports-event contracts under state gambling laws, finding Kalshi failed to show the contracts are CFTC-jurisdiction “swaps.”
- 9th Circuit, last month — reached a similar conclusion, backing state authority over sports-event contracts.
- 3rd Circuit, April — went the opposite direction, finding Kalshi likely to prevail on its federal-preemption argument and letting it operate in New Jersey during appeals.
- Supreme Court pressure — a group of state lawmakers filed an amicus brief with the Supreme Court this week, urging the justices to take up the dispute between Kalshi and state gaming authorities and settle whether states or federal agencies have jurisdiction over prediction market companies.
The Core Conflict: Federal Swaps vs. State Gambling Laws
The legal fight turns on one word: “swaps.” Under federal commodities law, the CFTC — not individual states — regulates swaps, a category of derivatives that Kalshi says covers its event contracts, from election outcomes to sports scores. If the contracts are swaps, state gambling laws are preempted, meaning they cannot apply. If they are not, each of the 50 states can impose its own licensing, bans, and consumer rules.
Why should a regular investor care? Because prediction markets have become one of the fastest-growing corners of the crypto-adjacent world. Platforms like Kalshi let users trade contracts on everything from elections to economic data, and crypto exchanges have raced to add similar markets. A ruling for the states could splinter the industry into 50 different regulatory patches, banning sports contracts in some states entirely. A ruling for Kalshi would cement the CFTC as the national referee — but would leave state regulators, who see sports betting as their turf and their tax revenue, furious.
Market Implications: What Happens Next
In the short term, Friday’s ruling means Kalshi’s sports contracts can be regulated — and potentially blocked — in Ohio and Tennessee under those states’ laws. Users in the 6th Circuit’s coverage area, which also includes Kentucky, Michigan, and Ohio’s neighbors, should expect state gaming authorities to act with fresh confidence. The 9th Circuit’s earlier ruling covers a much larger western swath of the country, including California.
The longer-term picture points to Washington. Kalshi now has two appellate losses and one win, exactly the kind of record that pushes a case toward the Supreme Court. The state lawmakers’ amicus brief adds political weight to the request. A decision by the justices to hear the case would put the entire prediction market industry — and a piece of the crypto trading ecosystem that has grown around it — under a legal microscope, with billions in trading volume tied to the outcome. Markets, meanwhile, continue trading with the broader backdrop steady: Bitcoin sits near 83,900 USD, Ethereum near 2,685 USD, and Solana near 121 USD, according to the site’s snapshot taken September 26.
The Verdict
Kalshi lost this round, but the war is heading upstream. With the 6th and 9th Circuits backing states and the 3rd Circuit backing Kalshi, the Supreme Court is running out of reasons to stay out. For investors and traders, the smart move is to watch two things: whether state regulators in Ohio and Tennessee move quickly to enforce, and whether the justices take the case. Either way, the era of prediction markets operating in a legal gray zone is coming to an end — the only question is who ends up holding the gavel.
The cryptocurrency market remains highly volatile. This article is for informational purposes only and does not constitute financial advice.
Who decides what you can bet on, your state or Washington. That framing is exactly right and this ends up at the Supreme Court.
3rd circuit broke the other way in april, its a clean split. scotus almost has to take it now
A clean split with the Third Circuit is basically an engraved invitation. Expect the petition by fall.
I remember when prediction markets were about elections and economics. Sports contracts brought the gambling regulators down on all of it.
kalshi spent years marketing itself as regulated, forgot that regulated means fifty regulators. sports contracts were the line and they crossed it loud
state or washington, that framing is right. with a three way circuit split this is scotus bound
your state, obviously. nevada and ohio did not spend decades building gaming commissions so an app could route around them
fifty regulators and fifty rulebooks is exactly what the CEA was supposed to prevent. but hey, states rights
the CEA predates apps that let anyone in Ohio bet on a Tennessee game though. congress wrote that law in 1936, nobody was routing around the ohio casino control commission from a phone
A unanimous panel found Kalshi failed to show the contracts are swaps under the Commodity Exchange Act. The federal hook argument looks finished.
unanimous panel as well, makes the cert petition harder when the lower courts keep agreeing with each other
counterpoint, the 3rd circuit going the other way is what forces scotus hand. unanimity inside one circuit doesnt cure a split