A federal appeals court ruled September 25 that Ohio and Tennessee may enforce their gambling laws against Kalshi’s sports-event contracts, rejecting the company’s argument that federal commodities law leaves the states no say. A unanimous panel of the U.S. Court of Appeals for the Sixth Circuit affirmed an Ohio federal court’s refusal to block the state’s regulators and vacated an order that had shielded Kalshi from Tennessee’s.
Kalshi runs an exchange registered with the Commodity Futures Trading Commission and began offering contracts on sporting events in early 2025. When the Ohio Casino Control Commission and the Tennessee Sports Wagering Council moved toward enforcement, Kalshi sued in both states. It argued that the Commodity Exchange Act gives the CFTC “exclusive jurisdiction” over swaps traded on federally registered exchanges, so state gambling law cannot reach them.
Writing for the panel, Judge Julia Smith Gibbons held that Kalshi had not shown its sports contracts fit the law’s definition of a swap. Even if they did, the court held, the act “neither expressly nor impliedly preempts Ohio’s or Tennessee’s gambling laws.”
The court started from the rule that “the historic police powers of the States” are not displaced by federal law “unless that was the clear and manifest purpose of Congress,” and it noted the long history of states regulating gambling inside their own borders. It cited the Supreme Court’s requirement that Congress use “exceedingly clear language if it wishes to significantly alter the balance between federal and state power” in such an area. “The CEA’s exclusive jurisdiction provision does not meet that high bar with respect to state gambling laws,” the opinion said.
The circuits are now divided. The Third Circuit sided with Kalshi against New Jersey, and the Ninth Circuit ruled against the company in Nevada on August 28. A Fourth Circuit appeal from Maryland is pending.
The Fifth Circuit, which hears federal appeals from Texas, has not ruled on the question. Texas law makes it an offense to bet “on the partial or final result of a game or contest” or on the result of an election. At a Senate State Affairs Committee hearing on September 15, Chairman Bryan Hughes, R-Mineola, called prediction markets a “loophole” around the state’s gambling ban, The Texan reported. Robert DeNault, Kalshi’s head of enforcement, told the committee the company runs an exchange under the CFTC’s jurisdiction rather than a gambling operation. Sen. Bob Hall, R-Edgewood, answered that “it is gambling.” Lt. Gov. Dan Patrick has made prediction markets a priority for the 2027 session, according to The Texan.
Texas wrote its gambling policy into its own law. The question in these cases is whether a federal agency’s registration of an exchange lets a company sell around that law in every state where its customers live. The Sixth Circuit answered that only Congress could make that choice, and only in plain words, which it has not done.
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