Sixth Circuit rules Kalshi's sports contracts are not swaps, leaving them under state gaming rules
Sixth Circuit says Kalshi's sports contracts are not swaps
A panel of judges on the Sixth Circuit Court of Appeals ruled on Friday, September 25, 2026, that sports-related contracts offered by prediction market provider Kalshi are not swaps. Because they are not swaps, the panel said they fall under state gaming regulations instead of the rules of the federal Commodity Futures Trading Commission (CFTC), the agency that oversees derivatives markets.
A prediction market is a platform where users trade contracts tied to the outcome of a future event. A swap is a type of financial contract that falls under federal derivatives oversight.
The decision is the latest from an appeals court in the ongoing legal fight between U.S. states and prediction market providers. According to CoinDesk, the ruling adds further reason for the U.S. Supreme Court to eventually take up the issue.
Key points from the ruling
- The three-judge Sixth Circuit panel ruled that Kalshi's sports-related events contracts are not swaps.
- The panel agreed Kalshi had the right to bring its case, but disagreed that the products are federally regulated swaps.
- The ruling covers two cases Kalshi brought against regulators in Ohio and Tennessee.
- Earlier rulings from the Third and Eighth Circuit appeals courts reached different conclusions.
What the court said about defining an 'event'
The panel wrote that it agreed Kalshi's sports-event contracts are conditioned on the occurrence of an event, but concluded the contracts do not depend on events "associated with a potential financial, economic, or commercial consequence" as defined in the relevant statute.
The ruling used a hypothetical example of the New York Giants winning a Super Bowl. It said the outcome could depend on how the "event" is defined. If the event is the Giants winning, then the victory would be described as that event having occurred. If the event is the game being played, then the Giants winning is the outcome.
"The proper terminology, then, seems to turn on how the event itself is defined," the ruling said. "And because nothing in the statutory text provides a clear indication that the event must be defined to exclude outcomes, we decline to read such a limitation into the statutory definition ourselves."
Ohio and Tennessee courts reached opposite results
The Friday ruling dealt with two cases Kalshi filed against regulators in Ohio and Tennessee. The company sought injunctions to block the states from suing it.
A federal court in Ohio denied Kalshi's request, while a federal court in Tennessee granted it. The Sixth Circuit's ruling resolved the two cases together.
Appeals courts are split on prediction markets
Two other appeals courts have already ruled on prediction markets. The Third Circuit Court of Appeals ruled that the CFTC has jurisdiction over prediction markets, while the Eighth Circuit Court of Appeals ruled that sports-related contracts are not swaps.
According to CoinDesk, this type of disagreement between circuit courts is the kind of situation that should lead to a Supreme Court case. The report did not say whether the Supreme Court has agreed to hear the matter.
Why states want to regulate these contracts
States have tried to bring prediction markets that offer sports-related contracts under their own regulatory frameworks since these markets grew after the 2024 election. States argue the markets compete with state gambling platforms and offer products similar to gambling sites and apps.
For many states, one issue is that federally regulated platforms do not pay state taxes while competing with state-regulated platforms. Another major point of contention is that prediction markets often offer their products to people as young as 18, rather than 21, which is the age used by most state gambling operators.
What is confirmed
The Sixth Circuit panel issued its ruling on Friday, September 25, 2026, covering Kalshi's cases against Ohio and Tennessee regulators. The panel found that Kalshi had standing to bring its case but that its sports-related contracts are not swaps and are therefore subject to state gaming regulations rather than CFTC rules. An Ohio federal court had denied Kalshi's injunction request, and a Tennessee federal court had granted it.
What is still unclear
The ruling does not settle the wider dispute between states and prediction market providers. The Third and Eighth Circuits have reached different conclusions, and it is not confirmed whether the Supreme Court will take up the issue. The source material does not describe what steps Kalshi or the states plan to take next.
Why this matters
The decision affects who regulates sports-related prediction contracts: state gaming authorities or the federal CFTC. That choice matters because states have argued that federally regulated platforms do not pay state taxes while competing with state-licensed gambling operators, and because the two systems use different minimum ages for customers. The disagreement between appeals courts means the rules can differ depending on where a case is heard.
Sources
Newisty Editorial Team covers technology, cryptocurrency, digital products, online platforms, developer tools and the wider digital economy. Our content is researched from official sources, company announcements, public documentation, market data and other primary or reputable sources. Articles are reviewed and edited before publication for clarity, accuracy and useful context.