preferred on
Points of Focus
- A unanimous Sixth Circuit panel ruled Kalshi failed to show its sports contracts qualify as federally regulated swaps.
- The ruling lets Ohio and Tennessee enforce state gambling laws, widening a federal appeals-court split.
- The CFTC is reportedly examining Kalshi trades linked to former Representative Adam Kinzinger; the agency has not publicly confirmed the probe.
Kalshi’s argument that sports prediction markets belong exclusively under federal commodities regulation has suffered another major setback just as questions over insider participation are testing the industry’s federal oversight model.
A three-judge Sixth Circuit panel unanimously ruled that Kalshi failed to establish that its sports-event contracts qualify as “swaps” under the Commodity Exchange Act.
The court went further: Even if the contracts were swaps, it found the federal law would not prevent Ohio and Tennessee from applying their gambling laws. The ruling affirmed Ohio’s earlier victory and vacated an injunction that had prevented Tennessee from enforcing its rules.
That second finding could prove more consequential than the classification question.
Kalshi has argued that because it operates a designated contract market by the Commodity Futures Trading Commission (CFTC), federal regulation should prevent individual states from imposing separate gambling regimes. The Sixth Circuit effectively rejected both parts of that defense.
Kalshi is now 1-for-3 at appeals courts
The ruling deepens an increasingly difficult geographic split.
The Third Circuit previously sided with Kalshi in its dispute with New Jersey, while the Ninth Circuit ruled against it in Nevada. The Sixth Circuit has now sided with Ohio and Tennessee.
New Jersey has already asked the Supreme Court to review the Third Circuit decision, making a nationwide resolution increasingly important as prediction markets operate across state borders.
The Sixth Circuit’s reasoning also challenges the economic foundation of Kalshi’s sports products.
Judge Julia Smith Gibbons wrote that sports outcomes lack the intrinsic financial consequences associated with traditional swaps. Contracts on interest rates or stock prices can hedge financial exposure; outcomes such as soccer corner kicks have, at most, downstream economic consequences.
Kinzinger trades create a different test
Separately, the CFTC is reportedly investigating trades made through a Kalshi account linked to former Republican Representative Adam Kinzinger in December 2024 and January 2025, including a market on whether he would receive a presidential pardon.
Kinzinger ultimately received a preemptive pardon from former President Joe Biden.
https://twitter.com/thehill/status/2105353481519583509
Kinzinger has said he made $823, possessed no inside information, and had not discussed the pardon with anyone.
The amount is small, but the regulatory question isn’t.
Prediction markets derive value partly from participants having information and expressing it through prices. When the subject of a contract can also trade that contract, however, informational advantage can become a market-integrity problem.
That leaves Kalshi confronting two different tests at once: whether its sports markets can escape state gambling regulation and whether federal oversight alone can adequately police who trades event contracts and what they know.
Share
Most read articles
