Kalshi loses Sixth Circuit appeal over Ohio and Tennessee gambling rules
Kalshi lost a Sixth Circuit appeal on September 25 over whether its sports event contracts qualify as swaps under the Commodity Exchange Act in Ohio and Tennessee. The court ruled they do not, leaving the contracts subject to state gambling laws. The dispute began after Kalshi began listing sports-related event contracts in early 2025. The ruling forces Kalshi to geofence both states or restructure its offerings. Kalshi is a CFTC-regulated exchange.
The Sixth Circuit ruling wounds Kalshi's federal preemption theory in a second circuit. The platform must now geofence Ohio and Tennessee or restructure its sports offerings to comply with state gambling regimes. That adds two more jurisdictions to the tribal lands already walled off. Legal spend compounds across parallel cases while the Supreme Court window stays closed.
Polymarket and other CFTC-registered platforms face identical exposure. Each circuit loss becomes precedent the next state copies. The deeper risk is market fragmentation. Traders hold positions whose legality shifts with geography. Uniform federal rules now depend almost entirely on whether the high court takes up the petitions sitting before it.
The Sixth Circuit loss is Kalshi's second circuit-level preemption defeat, after the Ninth Circuit, leaving it 1-2 overall while Polymarket and other CFTC-registered platforms watch the same playbook advance.