Full Breakdown
6th Circuit Rules States Can Regulate Sports Prediction Markets, Raising Supreme Court Stakes
By Drooid · · How we work
Core Ruling
On Friday, the 6th U.S. Circuit Court of Appeals in Cincinnati issued a unanimous opinion holding that Ohio and Tennessee may apply their state gambling laws to Kalshi’s sports-related event contracts. The panel concluded that Kalshi had not demonstrated that its contracts satisfy the statutory definition of a “swap” and therefore do not fall within the Commodity Futures Trading Commission’s (CFTC) exclusive jurisdiction. Even assuming the contracts were swaps, the court found that the Commodity Exchange Act (CEA) does not expressly or impliedly preempt the states’ gambling statutes.
Legal Background
Prediction-market platforms argue that their event contracts are swaps—financial derivatives regulated by the CFTC under the CEA, which was expanded by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Dodd-Frank was enacted after the 2008 financial crisis to bring swaps under federal oversight.
The 6th Circuit’s reasoning aligns with two recent appellate decisions that empower states: the 9th Circuit held that Nevada could regulate Kalshi’s contracts as gambling, and the 3rd Circuit allowed Kalshi to continue operating in New Jersey on the basis that the CEA preempts state law. The divergent rulings have created a circuit split that traditionally prompts Supreme Court review.
Key Figures
- Julia Smith Gibbons – Judge, 6th Circuit, author of the opinion.
- Eric L. Clay – Judge, 6th Circuit, joined the opinion.
- Rachel S. Bloomekatz – Judge, 6th Circuit, joined the opinion.
- Dani Lever – Spokesperson for Kalshi.
- Jonathan Skrmetti – Attorney General of Tennessee.
- Terry Duffy – Chief Executive Officer of CME Group.
- Kathy Hochul – Governor of New York.
Official Statements & Responses
- She further noted that the CEA’s exclusivity language is more likely to limit courts’ jurisdiction than to bar state regulation.
Conflicting Reports & Gaps
The appellate landscape is split: the 9th Circuit treats event contracts as gambling subject to state law, the 3rd Circuit finds them preempted by federal swap law, and the 6th Circuit joins the 9th Circuit’s view. No Supreme Court decision has yet resolved the split, and the Court has not indicated whether it will grant certiorari. Additionally, the CFTC has not provided a public comment on the 6th Circuit’s interpretation.
Why It Matters
The rulings determine whether prediction-market platforms operate under a uniform federal framework or a fragmented state-by-state regime. A patchwork could increase compliance costs, limit market liquidity, and expose users to varying consumer-protection standards. Conversely, federal preemption could centralize oversight but may also raise concerns about inadequate safeguards for gambling-related harms, especially among younger users.
What’s Next
Legal analysts note that the circuit split makes Supreme Court review more likely. Several states have filed amicus briefs urging the Court to clarify jurisdiction. Kalshi’s appeal in New Jersey remains pending, and other states continue litigation against prediction-market operators. The outcome will shape the regulatory architecture for a rapidly growing segment of the online betting market.
Verbatim Quotes
- “By running an unlicensed gambling operation, Polymarket has done more than just knowingly violate state law, they have put New Yorkers at risk, especially those underage who are most vulnerable to problem gaming,” — Governor Kathy Hochul — Governor Kathy Hochul, Governor of New York.