Third Circuit rules Kalshi sports-event contracts likely qualify as swaps
A divided Third Circuit ruled September 8 that Kalshi's sports-event contracts likely qualify as swaps under the Commodity Exchange Act. The determination marks a significant appellate-level classification of Kalshi's products under federal commodities law. Separately, Iowa gaming regulators are challenging the same contracts, arguing they belong under state gaming authority rather than federal commodity regulation. The disputes center on whether Kalshi's offerings fall under CFTC oversight or state-level gaming commissions.
The Third Circuit's swap classification weakens Kalshi's argument that its sports contracts sit outside both CFTC and state gaming reach. Kalshi now faces a narrowed middle ground: if the contracts are swaps, the CFTC gains clearer authority to bar them entirely under the Schiff-Curtis framework rather than merely regulate their format. That regulatory threat compounds the state pressure already forcing Nevada geofences and spawning suits in Connecticut and Baltimore.
Kalshi's legal spend multiplies across parallel fronts that cannot resolve until the Supreme Court acts on New Jersey's pending cert petition. Traders hold positions whose validity depends on which court or regulator speaks last. The swap label also exposes Polymarket and other platforms offering similar sports-linked contracts to identical classification risk, shrinking the safe harbor for the entire sector.
Third Circuit swap classification joins the Ninth Circuit's Nevada preemption loss and New Jersey's Supreme Court cert petition in a multi-front attack on Kalshi's federal shield that now spans three distinct judicial venues and two appellate circuits.