Sixth Circuit Rules Kalshi Sports Contracts Aren't Swaps
A second appeals court strips federal protection from Kalshi's sports prediction markets, handing power to states.
A Sixth Circuit Court of Appeals panel ruled this week that Kalshi's sports-event prediction contracts are not swaps under federal law, stripping the platform of CFTC oversight and handing jurisdiction to individual states, according to CoinDesk Markets.
Why It Matters
For prediction market participants, this decision creates a fragmented legal landscape overnight. Without federal preemption, Kalshi must now navigate up to 50 separate state regulatory regimes — many of which treat sports contracts as gambling and require gaming licenses. That compliance burden could sharply limit which U.S. residents can access sports-related contracts on the platform. For the broader prediction market sector, including competitors such as Polymarket and PredictIt, the ruling signals that sports verticals carry materially higher legal risk than political or financial event contracts.
Context
As of September 2026, this is the second appeals court to rule against Kalshi on this question — a pattern that weakens the company's argument that CFTC authority uniformly preempts state gambling laws. Kalshi has maintained that its contracts qualify as swaps, which would place them under exclusive federal jurisdiction via the Commodity Exchange Act and sidestep state-level gaming statutes. The CFTC itself had approved Kalshi's event contracts, making the judicial pushback a direct challenge to the agency's interpretive authority.
What's Next
Kalshi must now decide whether to seek en banc review, petition the Supreme Court, or restructure its sports-contract offerings state by state. A circuit split — already forming with two courts ruling against the platform — increases the probability that the Supreme Court eventually takes up the federal-versus-state jurisdiction question.
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