A U.S. appeals court ruled on Friday, Sept. 25, 2026, that Ohio and Tennessee may regulate event contracts offered by the prediction market operator Kalshi under their respective state gambling laws. The decision by a three-judge panel of the 6th U.S. Circuit Court of Appeals in Cincinnati found that federal law does not prevent these states from applying their own regulations to the platform.
The ruling follows a series of decisions in federal courts regarding the oversight of prediction markets, which allow users to wager on outcomes ranging from sports and the Oscars to elections and weather. While the 3rd Circuit in Philadelphia ruled in April that Kalshi's contracts were not subject to New Jersey's gambling laws, the 9th Circuit in San Francisco ruled in August 2026 that Kalshi's contracts are subject to Nevada's gambling laws.
In the unanimous 6th Circuit opinion, U.S. Circuit Judge Julia Smith Gibbons wrote that Kalshi failed to prove its sports event contracts qualify as "swaps," a type of financial derivative that falls under the exclusive oversight of the federal Commodity Futures Trading Commission (CFTC). The court held that the Commodity Exchange Act does not preempt the police powers states use to regulate gambling.
Tennessee Attorney General Jonathan Skrmetti stated the ruling protects bettors from risks associated with unregulated wagering, while Kalshi argued that a "state-by-state patchwork" of rules makes national market operations difficult.
The decision deepens a legal split between federal circuits, increasing the potential that the U.S. Supreme Court will be asked to determine whether state or federal authorities hold jurisdiction over these platforms. A split occurs when different appeals courts reach opposite conclusions on the same legal question. Currently, New Jersey has already petitioned the Supreme Court to overturn the 3rd Circuit's ruling from earlier this year. The 6th Circuit's decision vacated a preliminary injunction in Tennessee that had blocked state enforcement and upheld a prior denial of an injunction in Ohio.
Ohio and Tennessee are both currently Republican-controlled. The regulatory stance of some states contrasts with the position of the CFTC and the administration of President Donald Trump. Kalshi has indicated it expects the 6th Circuit decision will not survive further legal review. Currently, New York is also pursuing legal action against the prediction market Polymarket, alleging it ran an illegal gambling operation.
What happens next: Kalshi has not yet detailed its next legal steps following the Friday ruling. However, the existing petition from New Jersey regarding the 3rd Circuit case remains pending before the U.S. Supreme Court. The 6th Circuit decision allows Ohio and Tennessee to move forward with the enforcement of their gambling laws against Kalshi's event contracts. The case adds to the ongoing litigation surrounding the Commodity Futures Trading Commission's authority over nontraditional financial instruments.