The ruling, delivered on September 25, 2026, is the latest appellate setback for Kalshi, which had argued that its prediction market contracts should be classified as swaps to remain under federal regulatory oversight. The panel found that sports event contracts fall outside the definition of swaps, meaning they are not subject to jurisdiction of the Commodity Futures Trading Commission (CFTC). As a result, state laws — including gambling and gaming regulations — now govern these contracts. This decision aligns with a previous appeals court ruling against Kalshi on similar grounds, underscoring the legal hurdles facing prediction market operators in the United States. Kalshi offers contracts that allow users to bet on outcomes of events such as sports games, elections, and economic indicators. The court's determination opens the door for individual states to impose their own rules on sports-related contracts, potentially forcing Kalshi to comply with a patchwork of state regulations or restrict certain offerings in jurisdictions with strict anti-gambling laws.
Sixth Circuit Rules Kalshi's Sports Contracts Not Swaps, Handing Regulatory Power to States
Appeals court panel decision marks another legal loss for prediction market platform
Analysis
Why This Matters
- The ruling creates regulatory fragmentation: state-by-state compliance could increase costs and limit availability of sports prediction markets.
- It marks a significant limitation on the CFTC's authority over event contracts, potentially narrowing the scope of federally regulated prediction markets.
- The decision could affect the broader prediction market industry, including platforms like Kalshi and competitors, as legal uncertainty persists.
Background
Kalshi is a U.S.-based platform that offers event contracts — essentially bets on the outcome of real-world events — under CFTC oversight for some products. The classification of these contracts under the Commodity Exchange Act has been a legal battleground. The company previously faced a similar ruling in another circuit. This latest decision from the Sixth Circuit affirms that sports-related contracts do not fall under the swaps definition, leaving them to state regulators.
Key Perspectives
Kalshi: The company has argued that its contracts are swaps and should be regulated federally, providing a uniform legal framework across states. State regulators: State gaming and gambling commissions may now assert authority over sports prediction contracts, potentially leading to inconsistent requirements. Critics: Some state attorneys general and consumer advocates view prediction markets as unlicensed gambling, and this ruling could empower them to restrict or ban such products.
What to Watch
- Whether Kalshi seeks Supreme Court review or appeals en banc.
- How individual states respond — some may ban sports prediction contracts, while others may create licensing regimes.
- The CFTC's next move: it may seek legislation to clarify its authority over event contracts.
Sources
- Appeals court rules against Kalshi, says prediction markets can be regulated like gambling — The Hill News
- Another appeals court rules against prediction market provider Kalshi, says sports contracts are subject to state regulations — CoinDesk: Bitcoin, Ethereum, Crypto News and Price Data
- US court rules against Kalshi, says states can regulate prediction markets — Al Jazeera – Breaking News, World News and Video from Al Jazeera