The Sixth Circuit ruled on Sept. 25 that Ohio and Tennessee can enforce their gambling laws against Kalshi's sports contracts, rejecting the prediction-market operator's claim to exclusive federal oversight. The decision affirms an Ohio loss for Kalshi and vacates the injunction that had shielded it in Tennessee, threatening the states where an Eilers & Krejcik Gaming model puts 69% of its retail sports demand.
The Sixth Circuit ruled that Ohio and Tennessee can apply their gambling statutes to Kalshi's sports contracts, handing the exchange a second appellate loss. The unanimous panel found Kalshi had failed to show its sports contracts meet the Commodity Exchange Act's definition of a swap, the argument behind its claim to exclusive CFTC jurisdiction.
Two paths to the same outcome
The court added an alternative holding: even if the contracts were swaps, federal commodities law would still leave Ohio and Tennessee's gambling statutes standing. That gives the states two separate routes to the same result, since a future ruling in Kalshi's favor on the swap question would not disturb the preemption finding. The panel affirmed the Ohio ruling against Kalshi and vacated the Tennessee injunction, sending both cases back to lower courts. The ruling now governs federal courts in Ohio, Tennessee, Michigan and Kentucky.
Geofencing rejected as a defense
Kalshi argued that its duties as a federally designated contract market made state-by-state compliance impossible. The judges disagreed, pointing to companies that already geofence their offerings and telling Kalshi that "expensive does not mean impossible." A Michigan state-court injunction from Sept. 1 already requires Kalshi to block covered sports contracts for users inside the state, with violations carrying fines of up to $500,000 a day.
Demand concentrated in non-sportsbook states
EKG's July model estimates that 69% of Kalshi's retail sports demand comes from states without legal online sportsbooks, with California and Texas alone accounting for 44%. Sports contracts made up more than 90% of Kalshi's trades and 95% of its 2025 revenue, according to figures cited in the Ninth Circuit's August opinion.
The appellate split now runs two circuits against Kalshi and one in its favor, after the Third Circuit sided with Kalshi in New Jersey in April while the Ninth Circuit ruled against it in Nevada. New Jersey has asked the Supreme Court to resolve the split, and Kalshi's response is now due Nov. 9 after a Sept. 22 extension.
Source: CryptoSlate
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