Sixth Circuit Judges Appear Ready to Side With States Over Kalshi in Prediction Market Fight

Federal judges appeared skeptical of Kalshi’s core legal argument on Thursday, with one member of a three-judge panel on the U.S. Court of Appeals for the Sixth Circuit directly questioning why the prediction market operator was so opposed to the idea of state oversight. The exchange came during oral arguments over whether Kalshi’s sports-related event contracts fall under exclusive federal jurisdiction or remain subject to state gambling laws.

The hearing consolidated appeals stemming from two conflicting lower-court rulings. A federal judge in the U.S. District Court for the Middle District of Tennessee sided with Kalshi in February, granting a preliminary injunction and finding the company was likely to prevail on the merits. Less than three weeks later, a federal judge in the U.S. District Court for the Southern District of Ohio reached the opposite conclusion, ruling that Kalshi had not shown its sports event contracts qualify as swaps under the Commodity Exchange Act.

What Judges Pressed Kalshi On

Counsel for Kalshi, Tennessee, and Ohio appeared before Sixth Circuit Judges Eric Clay, Rachel Bloomekatz, and Julia Gibbons. Kalshi’s position rests on the argument that the Commodity Exchange Act gives federally regulated derivatives exchanges exclusive authority to list event contracts, which the company says preempts states from imposing their own licensing or gambling requirements. Judge Clay pushed back on that framing, noting that while the Commodity Exchange Act does grant federal authority in certain areas, the statute also preserves certain state powers — a point that goes to the heart of Kalshi’s preemption theory.

Attorneys for Ohio and Tennessee argued the opposite: that Kalshi’s sports contracts are, in substance, sports wagers rather than financial instruments, regardless of the label attached to them. Ohio Solicitor General Mathura Sridharan told the panel that accepting Kalshi’s interpretation would effectively mean sports betting has always fallen under federal derivatives law rather than state gaming regulation — something she called inconsistent with decades of legal and regulatory practice. Tennessee Assistant Attorney General Aaron Bernard made a similar argument, describing Kalshi’s products as a modern form of parimutuel wagering rather than a federally protected swap.

Why the Ruling Matters Beyond Ohio and Tennessee

The states also argued that if Kalshi’s sports event contracts run afoul of federal commodities law, they would be prohibited under both federal and state law — undercutting any claim that federal law preempts state enforcement in the first place. No ruling was issued Thursday, and the panel gave no indication of a timeline for a decision.

The stakes extend well past this single appeal. Courts around the country have split on whether Kalshi’s event contracts are legitimate derivatives products regulated by the Commodity Futures Trading Commission or unlicensed sports betting subject to state gaming law — the same question is playing out in ongoing litigation in states including Nevada and Maryland. A Sixth Circuit ruling against Kalshi would hand states fresh legal footing to enforce their own gambling statutes against prediction markets, while a win for Kalshi would bolster the company’s argument that its products sit outside state regulators’ reach entirely. Given how directly this fight touches the broader legal status of prediction markets nationwide, bettors and operators alike are watching the Sixth Circuit closely for signs of where the rest of the federal courts may land.