Sixth Circuit limits swap definition and denies preemption of state sports-betting laws
The U.S. Court of Appeals for the Sixth Circuit ruled that the definition of a swap under federal law is narrower than some platforms had argued, and it rejected the claim that federal law preempts state sports-betting statutes. The decision directly addresses event contracts, the product Kalshi lists as a designated contract market. Kalshi's contracts now sit adjacent to state gambling regimes that the court held are not displaced by CFTC registration alone.
Kalshi and every CFTC-registered platform offering sports-linked contracts now face a double squeeze. The narrowed swap definition removes one federal safe harbor, and the preemption denial invites states to enforce gambling statutes against federally listed products. Operators must geofence or suspend trading market by market, not rely on a single national license.
State attorneys general in Michigan, Missouri, and New York already have active suits or investigations. Each state victory becomes a template the next can file. The Supreme Court petitions from New Jersey, Robinhood, and Crypto.com face a July 2026 deadline, but months of delay risk more bans before any federal answer. Traders hold positions whose legality now shifts with state borders. Platform legal spend compounds faster than any single resolution.
Extends the Sixth Circuit's Kalshi sports contracts ruling in Ohio and Tennessee to the swap-definition question, giving state attorneys general a second precedent to copy as they chip away at federal preemption.