Kalshi Loses Sports-Betting Shield in Ohio and Tennessee

Ohio and Tennessee Injunctions Fall

Kalshi operates a designated contract market, a federally regulated exchange where event contracts pay according to whether a specified outcome occurs. Its offerings initially covered subjects including climate, crypto, economics and politics, before sports contracts arrived in early 2025, according to the opinion.

The Ohio Casino Control Commission and Tennessee Sports Wagering Council indicated that they intended to enforce their states’ gambling laws against the sports offerings. Kalshi sued, arguing that the Commodity Exchange Act displaced those laws because federal regulators had exclusive authority over its contracts.

The lower courts reached opposite conclusions. Ohio denied Kalshi a preliminary injunction. Tennessee granted one, finding the company likely to succeed on its argument that the sports contracts were swaps and that state enforcement conflicted with federal law.

The appeals panel resolved that disagreement against Kalshi. Judges Eric Clay, Gibbons and Rachel Bloomekatz heard arguments on July 30; the published decision was filed September 25 in appeals numbered 26-3196 and 26-5235.

A preliminary injunction is an interim court order protecting a party while litigation continues. Losing that protection is a concrete setback, but it is different from a final damages judgment, an assessed fine or an order closing every market on the platform.

The appeals court said Kalshi had not shown a likelihood of success on the merits, a necessary part of obtaining the interim order. It therefore did not reach the other preliminary-injunction factors. That procedural posture is important when assessing what the ruling establishes today and which decisions still belong to the district courts.

The ruling arrives as state challenges spread across the sector. New York’s recent lawsuit against Polymarket US seeks a state ban and other relief, but that separate petition concerns a different exchange and does not itself establish a granted court order.

Kalshi’s Sports-Swap Argument Fails

The central statutory question was whether these contracts were swaps, a category of derivatives covered by the CFTC’s exclusive-jurisdiction provision. The disputed definition includes contracts tied to an event associated with a potential financial, economic or commercial consequence.

The panel accepted that a sports outcome could be an event. It rejected the broader claim that downstream economic effects were enough to place sports contracts within that definition. Its analysis distinguished an event intrinsically connected to financial risk, such as an interest-rate change, from a game result with subsequent effects on businesses.

Kalshi had pointed to the economic consequences of sports results for sponsors, advertisers, television networks and franchises. The panel found that argument insufficient under its reading of the statute. A contract can generate a financial payoff for its purchaser without the underlying event necessarily qualifying for the federal category the exchange invokes.

That distinction prevents the ruling from being read as a rejection of every event contract. It addresses the sports products before the court and the statutory reasoning offered to protect them. Kalshi’s separate stock-index and copper perpetual-futures filings involve different underlying events and product terms.

The court then supplied an alternative basis for its decision: even if the sports contracts were swaps, federal commodities law did not expressly or implicitly displace the two states’ gambling laws. Preemption means that federal law overrides a conflicting state requirement.

Kalshi argued, among other points, that federal impartial-access rules conflicted with geographic restrictions under state gambling law. The panel rejected that reasoning, explaining that impartial access to the markets an exchange offers does not require those contracts to be available in every state.

The court did allow Kalshi to bring its challenge to state enforcement. Its defeat therefore rests on the preliminary-injunction merits rather than a categorical finding that the exchange had no route to seek federal judicial relief.

CFTC Authority Faces a Circuit Split

The Sixth Circuit opinion identifies conflicting appellate results. The Third Circuit upheld injunction protection in New Jersey, while the Ninth Circuit’s August 28 Nevada decision upheld the dissolution of Kalshi’s injunction there. Friday’s ruling adds another appellate rejection of Kalshi’s state-law shield.

The CFTC has taken the opposite position in its own litigation. In a June lawsuit against New Mexico, the agency sought to block state gambling enforcement against registered exchanges, asserting exclusive federal authority over event contracts. That remains the regulator’s stated litigating position, rather than a nationally settled legal conclusion.

Related Kentucky suits against prediction-market operators show how the same distribution model can face challenges from multiple state authorities. Federal exchange registration and state permission to offer a particular sports product are the overlapping questions the courts are testing.

For platforms, the disagreement creates uncertainty about offering one product across state borders. For customers, the relevant practical details include whether a venue changes eligibility, permits new positions or issues instructions about contracts already held. The September 25 opinion does not provide a customer-account timetable or quantify affected users and positions.

Alternative.me’s Crypto Fear and Greed Index read 74, or Greed, on September 26. The broad sentiment reading does not measure confidence in Kalshi’s legal position.

The next signals are district-court proceedings, any request for further appellate relief and platform notices. The published opinion establishes the injunction outcomes, but leaves the timing and form of subsequent enforcement and any customer-access changes unresolved.