Kalshi Loses Again: Appeals Court Says Sports Contracts Aren't Swaps

Kalshi's entire legal strategy rests on one idea: a contract on who wins a football game, listed on a CFTC-regulated exchange, is a federally regulated derivative, not a bet. On September 25, 2026, a third federal appeals court looked at that idea. For the second time in a month, it said no.

What happened

The U.S. Court of Appeals for the Sixth Circuit, in Cincinnati, sided with Ohio and Tennessee against Kalshi, ruling that the company's sports-event contracts are not "swaps" under the Commodity Exchange Act (CEA), according to reporting by CNBC and The Hill. That clears the way for both states to apply their own gambling laws to Kalshi.

• The panel: Circuit Judge Julia Smith Gibbons wrote the opinion, joined by Judges Eric L. Clay and Rachel S. Bloomekatz, per The Block and other outlets.
• The core holding: "Based on this reading, we hold that Kalshi's sports-event contracts are not swaps under the CEA. Unlike contracts based on financial values or instruments, Kalshi's sports-event contracts have only downstream economic consequences," the court wrote, as quoted in coverage of the opinion.
• The backup holding: the judges added that even if the contracts were swaps, the CEA would not expressly or impliedly preempt Ohio's or Tennessee's gambling laws.
• The procedural result: the panel affirmed an Ohio district court that had refused to block the state, and reversed a Tennessee district court that had sided with Kalshi.

Kalshi spokesperson Dani Lever responded that "the ruling shows exactly why a state-by-state patchwork doesn't work," according to SBC Americas and other reports.

The scoreboard: a real circuit split

This is no longer one bad day in court. The federal appellate record now looks like this:

• Third Circuit (April 2026): sided with Kalshi, holding that New Jersey could not use its gambling laws against contracts traded on a CFTC-licensed designated contract market.
• Ninth Circuit (August 28, 2026): sided with Nevada, 3-0, treating Kalshi's sports contracts as sports gambling for purposes of state law (Nevada Current).
• Sixth Circuit (September 25, 2026): sided with Ohio and Tennessee.

According to Sportico's analysis and other coverage, New Jersey has already petitioned the Supreme Court, and Crypto.com and Robinhood have separately urged the Court to take up the federal-versus-state question. As of the Sixth Circuit ruling, the justices had not agreed to hear the New Jersey case.

Why this matters to futures traders

You may never buy a contract on a Sunday football game. But the legal question here is about our rulebook. Kalshi's argument is that anything listed on a CFTC-registered exchange belongs to federal derivatives law, full stop. The Sixth Circuit's answer is narrower: a contract only counts as a swap if its value is tied to something financial or economic, and a game score has "only downstream economic consequences."

If that reasoning spreads, it draws a sharper line between "real" derivatives, the index and commodity futures most of our readers trade, and event contracts that look like derivatives but function like wagers. That line affects which products exchanges and brokers push to retail apps, how they are marketed, and who gets to regulate them.

The controversy: both sides

Kalshi's side: a single federal regulator, the CFTC, should oversee products on federally registered exchanges. Fifty different state gambling regimes make a national market impossible, which is exactly Lever's "patchwork" point.

The states' side: sports betting is a licensed, taxed and age-restricted business in states that allow it. Calling a bet a "swap" should not let a platform skip licensing, taxes and consumer protections that sportsbooks must follow. Two appeals courts now agree with that framing.

Our take

Our take: The Sixth Circuit's "downstream economic consequences" test is the most honest sentence written about prediction markets this year. A crude-oil future hedges something. An S&P future hedges something. A contract on a field goal mostly hedges boredom. Futures traders should be wary of any legal theory that stretches the word "derivative" to cover everything, because when the backlash comes, it rarely stays neatly inside the sports category.

The uncomfortable question: if the Supreme Court eventually sides with Kalshi, does every state lose the ability to police sports gambling as long as it is routed through a CFTC-registered venue?

What traders should do (general, not advice)

• If you use event contracts, know that availability can change state by state and quickly.
• Keep your core trading capital on platforms whose products are not in active legal limbo.
• Watch for a Supreme Court decision on whether to hear the issue; that is the next real catalyst.

FAQ

Loomi.Ai provides educational market research, not financial advice. Trading futures and options involves substantial risk of loss, and backtested results are historical and do not guarantee future returns.

Sources

• Appeals court rules that states can regulate Kalshi's sports prediction markets, CNBC
• 6th US Circuit Court of Appeals rules against Kalshi, says prediction markets can be regulated like gambling, The Hill
• Kalshi loses appeal over Ohio and Tennessee sports betting laws, widening circuit split, The Block
• Kalshi legal woes grow as Tennessee, Ohio win at Sixth Circuit, SBC Americas
• Kalshi Split Widens With 6th Circuit Ruling on Sports Event Contracts, Sportico
• Ninth Circuit win for Nevada over Kalshi sets up potential Supreme Court showdown, Nevada Current