Federal appeals court rules Kalshi sports bets are not swaps and states can enforce gambling laws

A three-judge panel in the US Court of Appeals for the Sixth Circuit has ruled unanimously against the prediction market Kalshi, concluding that sports wagers offered on the platform do not qualify as "swaps" under federal law and that states retain the authority to enforce their gambling laws.

Issued on Friday, the decision upheld an Ohio district court ruling against Kalshi and vacated a favorable order from a Tennessee district court. The litigation stems from actions taken by Ohio and Tennessee gambling regulators after Kalshi offered sports betting without obtaining state licenses or paying state taxes.

While the Commodity Futures Trading Commission has exclusive jurisdiction over swaps, the court determined that Kalshi's sports-event contracts lack the intrinsic financial consequences required for swaps and that federal law does not preempt state gaming regulations. The ruling marks the second major victory for states against Kalshi, following a Ninth Circuit decision in Nevada, contrasted with a Third Circuit ruling in New Jersey favoring Kalshi.

New Jersey has recently asked the US Supreme Court to resolve the nationwide issue, and a Fourth Circuit case involving Maryland remains pending.