Kalshi Asks the Full Sixth Circuit to Reopen Sports Contracts

Kalshi asked the full U.S. Court of Appeals for the Sixth Circuit on October 9 to rehear a 3-0 sports-contracts loss to Ohio and Tennessee. The filing points to Commodity Futures Trading Commission rules issued the same day that would treat event contracts as swaps.

The panel had already built a second wall. Even if those contracts were swaps, the judges said the Commodity Exchange Act would not override Ohio or Tennessee gambling law.

The Panel Already Closed the Swap Door

Circuit Judge Julia Smith Gibbons wrote for Judges Eric L. Clay and Rachel Bloomekatz in a unanimous September 25 opinion that joined two appeals, Nos. 26-3196 and 26-5235. Argument was heard on July 30, 2026. KalshiEX LLC runs a designated contract market, a CFTC-registered exchange, and began listing sports-event contracts in early 2025 after years of contracts on climate, crypto, economics, politics, and popular culture.

Ohio’s Casino Control Commission moved first. In March 2025 it told Kalshi to stop offering the sports contracts without a state gambling license. Tennessee’s Sports Wagering Council followed in January 2026. Kalshi sued in both states and asked federal judges to block enforcement on the ground that the Commodity Exchange Act gives the CFTC “exclusive jurisdiction” over swaps traded on designated contract markets.

The trial courts split. Chief Judge Sarah Daggett Morrison in Columbus denied an injunction. Judge Aleta Arthur Trauger in Nashville granted one. The Sixth Circuit took both cases together and sided with the states on two independent grounds.

We hold that Kalshi has not shown that its sports-event contracts satisfy the statutory definition of a “swap” so as to fall within the scope of the CFTC’s “exclusive jurisdiction.” And, even assuming that Kalshi’s sports-event contracts are swaps, we alternatively hold that the CEA neither expressly nor impliedly preempts Ohio’s or Tennessee’s gambling laws.

Julia Smith Gibbons, Circuit Judge, U.S. Court of Appeals for the Sixth Circuit

The swap holding turned on 7 U.S.C. § 1a(47)(A)(ii), which can treat as a swap a contract whose payment depends on an event “associated with a potential financial, economic, or commercial consequence.” Gibbons wrote that Kalshi’s sports-event contracts have only downstream economic consequences, if they have economic consequences at all, unlike contracts tied to interest rates or stock prices. She said it is hard to see how pricing the chance of a given number of corner kicks, or of a 30-leg parlay hitting, would advance the goals Congress had in mind.

Former CFTC Chair Gary Gensler, appearing as a friend of the court, had warned that Kalshi’s reading would reach every sports wager placed in a casino, on an online sportsbook, or between two friends at a bar. The panel treated that breadth as a reason to stop, not a reason to expand.

CFTC Writes Event Contracts In and Sportsbooks Out

On October 9, 2026, the CFTC tried to draw the line the courts have been fighting over. In Release 9310-26, the agency proposed to include event contracts in the swap definition, covering contracts based on sports, politics, cultural events, and weather. Comments are due within 30 days of publication in the Federal Register.

Chairman Michael S. Selig called the products commodity derivatives inside the agency’s exclusive jurisdiction. Americans, he said, use event contracts to hedge risks, speculate, and publish information about future outcomes.

The same day, in Release 9309-26, the commission issued an interim final rule to exclude casino-style gambling products from that definition, including wagers placed on sportsbooks and casino games. That rule takes effect upon Federal Register publication, with a separate 30-day comment window after that notice.

Casino-style gambling products are not derivatives. Just as the CFTC has done with respect to other products historically regulated by the states, the Commission today provides clarity regarding the limits of its regulatory remit by codifying the exclusion of casino-style gambling products from the “swap” definition.

Michael S. Selig, Chairman, Commodity Futures Trading Commission

The exclusion is built as a two-part test. The provider must be licensed under state or tribal gambling law, and the transaction must not trade on a board of trade, an organized exchange, a swap execution facility, or another multilateral market. Where both tests are met, the rule names three buckets of products that stay out of the swap definition.

PRODUCTS THE INTERIM RULE KEEPS OUT

• Sports wagers: A licensed sportsbook or sports wagering operator accepts a wager on the outcome of one or more sporting events.
• Casino games: A licensed casino operator takes a wager on a table game, a slot machine, or another electronic gaming device.
• Other licensed games: Bingo, pool wagering, lotteries, raffles, and similar games of chance remain under state or tribal gambling law.

That venue line is the point of the paired rules. A bet taken by a licensed book stays with the states. A contract that trades on a designated contract market is what the CFTC wants inside its swap definition. Kalshi’s petition treats both actions as new law that undercuts the Sixth Circuit panel and draws a legal line between exchange-traded event contracts and ordinary bookmaker wagers. Lawyer Felix Shipkevich put the older objection more bluntly: swaps exist to transfer a risk someone already has, and a reading in which almost everything in life has some economic consequence has no real limit.

The Alternate Holding Still Blocks Preemption

Kalshi’s lawyers, including William E. Havemann and Neal Katyal at Milbank, argue that Congress gave the CFTC exclusive jurisdiction over contracts traded on designated exchanges, and that the September 25 decision clashes with other circuits and with the Sixth Circuit’s own cases. The petition, filed the day of the CFTC announcements, says the new proposals substantially undermine the panel’s reasoning.

The swap proposal, if finalized, would speak to the first holding. It would not, on its face, erase the second. Gibbons wrote that the CEA’s “exclusive jurisdiction” clause is not a typical preemption provision. The statute also contains a savings clause that, except as provided by that grant, does not supersede or limit the jurisdiction of other federal agencies or of regulatory authorities under state law, and does not stop those authorities from carrying out their duties.

Because gambling regulation has long sat with the states, the panel said the presumption against preemption applies with particular force. Ohio and Tennessee, in that view, are policing sports betting and only incidentally touching an exchange. A later CFTC regulation that labels Kalshi’s sports contracts as swaps still has to get through that backup holding before it restores an injunction in Cincinnati or Nashville.

The agency had already tried to be in the room. CFTC lawyers appeared on the Ohio amicus brief. That did not move the three judges off either ground. En banc review is the path Kalshi now wants for both holdings at once, rather than a slow remand in which Tennessee can enforce and Ohio already can.

A 2-1 Split Heads to the Supreme Court

Three federal appeals courts have now answered the same statutory question in different ways. The Third Circuit is the only one that has treated Kalshi’s sports contracts as swaps and kept a state off the platform. The Sixth and Ninth Circuits have let gambling regulators proceed. New York, in a separate track, sued Polymarket in September, alleging an illegal gambling operation, so the fight is no longer a Kalshi-only docket.

HOW THE APPEALS COURTS SPLIT

Mary Jo Flaherty, interim director of the New Jersey Division of Gaming Enforcement, and co-petitioners asked the Supreme Court to take the Third Circuit case. The petition was filed on September 2, 2026, and docketed on September 8 as Flaherty v. KalshiEX, LLC, No. 26-299. Kalshi’s response is due on November 9, 2026. The American Gaming Association’s brief frames the question as whether states may regulate sports bets offered on prediction markets, the same split the Sixth Circuit just deepened.

Kalshi is running the same full-court play in the West. On September 9, 2026, it filed a Ninth Circuit rehearing petition in September in KalshiEX LLC v. Assad, No. 25-7516, after the Nevada loss. That petition says the panel created a circuit split on an exceptionally important preemption question and left a decision that will be hard to apply once the CFTC finishes rewriting its swap rule. Ohio, 38 other states, and the District of Columbia have also filed in the New Jersey case, along with tribal governments, gaming regulators, former CFTC Chair Gensler, and former Senator Christopher J. Dodd.

NFL Brief Backs New Jersey Against Kalshi

The National Football League chose a side on October 8, 2026. In a 32-page amicus brief supporting New Jersey, with former U.S. Attorney General William Barr on the team, the league told the justices that the Sixth and Ninth Circuits got it right. It called sports event contracts a new form of sports betting that undermines integrity work already done with state-regulated books.

On the first Sunday of the 2026 NFL season, the league said, NFL-related contracts accounted for $1.8 billion of $3.3 billion in prediction-market volume, more than half the day’s total. “Billions of dollars will be bet on NFL games through prediction markets each season, and any delay from the Court will result in increasing consumer harm and risk to game integrity,” the brief said. It asked for a decision before another season passes, and said that if the Third Circuit view prevails, the league would push the CFTC, the exchanges, and Congress for tighter rules before the 2027 season.

SAFEGUARDS THE LEAGUE SAYS WERE REFUSED

• Easy-to-move markets: Ban contracts one person could readily manipulate, including some kicker and penalty outcomes.
• Injury and officiating: Keep player-injury and referee-call contracts off the board, along with results that can be known in advance and some broadcast-mention markets.
• Age 21: Match the sportsbook standard; Kalshi accepts customers 18 and older.

The NFL also questioned staffing. It put the CFTC at 543 employees nationwide and said gaming regulators in Nevada and in Pennsylvania each employ close to 400 people. It said Kalshi has not given the league a practical way to flag insiders such as team staff. Kalshi answered that the CFTC is already policing sports-related markets, which it said are now listed on nearly every U.S. commodities exchange. MLB and the NHL have not joined the brief. The NFL is the only major men’s league in the New Jersey file so far.

Ohio May Enforce After the Tennessee Injunction Fell

The Sixth Circuit did not decide whether Kalshi owes state betting taxes or whether a cease-and-desist becomes a fine. It decided who may try. In Ohio, the denial of a preliminary injunction stands, so the Casino Control Commission can move under state gambling law while the case continues. In Tennessee, the Nashville injunction is vacated, and the Sports Wagering Council is no longer barred by that order from treating the sports contracts as unlicensed wagering.

FROM LISTING TO THE FULL-COURT ASK

1. Early 2025: Kalshi lists sports-event contracts on its designated contract market after self-certifying them with the CFTC.
2. March 2025: The Ohio Casino Control Commission orders Kalshi to stop offering the sports contracts without a state license.
3. January 2026: The Tennessee Sports Wagering Council issues its own directive, naming Polymarket and Crypto.com’s Nadex as well.
4. April 6, 2026: A divided Third Circuit keeps New Jersey off Kalshi’s sports contracts.
5. August 2026: The Ninth Circuit rules for Nevada regulators.
6. September 25, 2026: The Sixth Circuit affirms Ohio’s injunction denial and vacates Tennessee’s injunction.
7. October 8-9, 2026: The NFL files at the Supreme Court; the CFTC issues its two swap actions; Kalshi asks the full Sixth Circuit to rehear.

Traders in the Sixth Circuit’s territory now face a geofence risk that did not exist while the Tennessee order was live. Other attorneys general have a template that survived a unanimous appellate panel. Kalshi’s remaining federal shield, for sports, is the Third Circuit injunction and whatever the CFTC can lock into a final swap definition before the next court writes.

Kalshi Must Answer New Jersey by November 9

Two clocks now run on different tracks. In Cincinnati, the full Sixth Circuit will decide whether to take the Ohio and Tennessee appeals en banc, send them back to the same three judges, or leave the September 25 judgment in place. In Washington, Kalshi’s Supreme Court opposition in No. 26-299 is due on November 9, 2026. The CFTC’s comment windows do not start until the Federal Register publishes the October 9 documents, and the casino exclusion becomes operative on that publication date, not on the press-release date.

A grant of rehearing would put the swap proposal and the preemption holding in front of the whole court together. A denial would leave Ohio and Tennessee free to enforce under the panel opinion and would send the live national question to the justices in the New Jersey case, where the NFL, 39 states, the District of Columbia, and a long list of tribes and gaming groups are already on the docket. Kalshi is betting that a regulator’s new definition can reopen a door a 3-0 panel said would stay shut even if the definition were right.