The federal appeals court in Cincinnati has dealt Kalshi its second major defeat in a month. On September 25, 2026, a unanimous three-judge panel of the Sixth Circuit ruled that Ohio and Tennessee can apply their gambling laws to Kalshi's sports event contracts, rejecting the platform's argument that federal commodities law shields it from state regulation. Writing for the panel, Judge Julia Smith Gibbons put it plainly: "Ohio and Tennessee can regulate event contracts under their gambling laws." The details here come from the ruling and reporting by CNBC, Al Jazeera, and Sportico.
The reasoning tracks the argument states have been making all year. Kalshi says its sports contracts are "swaps" that fall under the exclusive jurisdiction of the Commodity Futures Trading Commission, so state gambling law is preempted. The court was not persuaded: Kalshi had not shown that its sports-event contracts meet the statutory definition of a swap, so there is nothing for the CFTC's exclusive jurisdiction to displace, and the states are free to treat them as bets.
The circuit split is now unavoidable
This is what turns a running dispute into a Supreme Court case. Two federal appeals courts now say states may regulate sports prediction markets: the Ninth Circuit ruled in August that Kalshi's contracts are subject to Nevada's gambling laws, and the Sixth has now added Ohio and Tennessee. Against them stands the Third Circuit, which held in April that New Jersey's laws are preempted by federal commodities law. When appeals courts split this cleanly on the same question, the Supreme Court is the only body that can settle it.
That path is already open. New Jersey asked the Supreme Court on September 2 to decide whether states can apply their gambling laws to event contracts on CFTC-regulated exchanges, and Kalshi's response is expected by November 9. It is not yet clear whether the Court will take the case now or wait for more circuits to weigh in, but the Sixth Circuit ruling makes the conflict harder to ignore. A Kalshi spokesperson reiterated the company's core position, that a national market cannot function when the rules change at every state line and that Congress created a single federal regulator for exactly that reason.
Our take
The momentum has clearly shifted toward the states. Two circuits in two months have said the same thing, and the reasoning is consistent: if a sports contract walks and quacks like a bet, a state can treat it as one. It is worth noting that Ohio and Tennessee are both licensed sportsbook states, which undercuts the industry's favorite argument that prediction markets simply fill a gap where no legal option exists. This does not shut Kalshi off overnight, and the company will keep operating under CFTC oversight while it litigates, but the direction of travel is unmistakable and the stakes keep rising as the platforms scale. For the fuller background, see our explainer on how the fight reached the Supreme Court's doorstep. We cover prediction markets as what they are, a fast-growing product on unsettled legal ground, and not as a substitute for a licensed sportsbook.