Appeals court rules Ohio and Tennessee can regulate Kalshi's sports contracts, deepening a split headed for the Supreme Court

The 6th U.S. Circuit Court of Appeals ruled on Friday that Ohio and Tennessee may apply their gambling laws to Kalshi's sports-event contracts. The three-judge panel was unanimous, CNBC reported, and the decision reverses a Tennessee federal court that had sided with Kalshi while upholding an Ohio federal court that had sided with the state.

It is the second appeals-court loss for prediction markets on sports contracts. CNBC reported that the 9th Circuit ruled last month that Nevada can regulate such contracts. In April, the 3rd Circuit went the other way in New Jersey's case, finding that the Commodity Futures Trading Commission has exclusive authority over swaps. New Jersey has already asked the U.S. Supreme Court to hear that case.

Two holdings, and the second one is the one that matters

Most headlines stopped at the first finding: Kalshi had not shown that its sports contracts meet the legal definition of a "swap," so they are outside the CFTC's exclusive jurisdiction. According to CoinDesk, the panel accepted that the contracts depend on "events," but said those events are not "associated with a potential financial, economic, or commercial consequence" as the statute requires.

The court then went further. "Even assuming that Kalshi's sports-event contracts are swaps, we alternatively hold that the CEA neither expressly nor impliedly preempts Ohio's or Tennessee's gambling laws," the opinion said, as quoted by CNBC.

That alternative holding is the harder one for the industry. The first finding can be fought contract by contract: an exchange could argue that some other product does carry economic consequences. The second says that even a product that clearly is a swap does not automatically escape state gambling law. If the Supreme Court takes the question up, platforms will need to beat both findings, not just one.

Where the states now stand

The outlets differ on the full tally. CoinDesk described the earlier ruling against the contracts as coming from the 8th Circuit rather than the 9th. Either way, at least two appeals courts have now ruled for the states and one for Kalshi, which is the kind of split that usually brings a case to the Supreme Court. It is not clear whether the justices will take New Jersey's petition now or wait for more circuits, CNBC noted.

The CFTC has sued nine states to defend its claim of exclusive authority, according to CNBC. Neither Kalshi nor the CFTC commented immediately. Tennessee Attorney General Jonathan Skrmetti said Kalshi "attempted an end run around Tennessee law to avoid any of the rules or taxes associated with sports gambling."

Who this reaches

Kalshi users in Ohio and Tennessee are the most exposed. The ruling removes the injunction that had protected Kalshi in Tennessee, and both states can now seek to enforce their gambling rules against the platform. Neither CNBC nor CoinDesk reported any immediate order telling residents to close positions, but that is the risk to watch.

Licensed sportsbooks gain the most. Skrmetti's statement names the issue directly: taxes. When New York sued Polymarket this week, the state's own data showed licensed mobile books hand about 51% of their gross gaming revenue to the state. Every ruling like this one keeps sports contracts inside that tax system instead of beside it. Age is the other gap: CoinDesk noted that prediction markets often accept users from 18, while most state-licensed operators require 21.

Traders who price the same game on both kinds of venue should expect state-by-state availability to keep shifting until the Supreme Court acts. Our sportsbook odds board shows the licensed side of that comparison.

Sources: CNBC (which discloses a commercial relationship with and minority investment in Kalshi), CoinDesk, New York State Gaming Commission data via earlier Chronicle reporting. This is market information, not investment advice.