# Kalshi loses again as judges rule prediction markets must obey gambling laws

> A federal appeals court sided with Ohio and Tennessee, ruling that Kalshi's sports betting platform must follow state gambling laws, not just federal oversight.
- Title: Kalshi loses again as judges rule prediction markets must…
- Summary: A federal appeals court sided with Ohio and Tennessee, ruling that Kalshi's sports betting platform must follow state gambling laws, not just federal…
- Keywords: kalshi, prediction markets, sports betting, gambling regulation, sixth circuit court of appeals, cftc, ohio, tennessee, federal preemption, state gambling laws, technology, science
- Source: Ars Technica — https://arstechnica.com/tech-policy/2026/09/another-court-rules-kalshi-sports-bets-arent-swaps-says-states-can-crack-down
- Published: 2026-09-28T19:04:09+00:00
- Read time: 1 min
- Topics: kalshi, prediction markets, sports betting, gambling regulation, sixth circuit court of appeals, cftc, ohio, tennessee, federal preemption, state gambling laws, technology, science
## Sixth Circuit rules against Kalshi
A three-judge federal appeals panel unanimously sided with Ohio and Tennessee against prediction market Kalshi on Friday.
## Kalshi's sports bets aren't swaps
The court found Kalshi's sports wagers do not meet the legal definition of swaps under federal law, so the CFTC does not have exclusive jurisdiction.
## Congress didn't block state laws
Even if Kalshi's contracts were swaps, the court ruled Congress did not prohibit states from enforcing their own gambling laws against prediction markets.
## What the judge wrote
Judge Julia Smith Gibbons wrote that Kalshi failed to show its contracts qualify as swaps under federal law.

> We hold that Kalshi has not shown that its sports-event contracts satisfy the statutory definition of a 'swap'
## Why Kalshi was sued
Kalshi offers sports betting across the US without state gambling licenses or taxes, operating in states where sports gambling is illegal.
## The key legal question
Courts must decide if sporting events have the financial consequences needed to qualify as swaps under federal law.
## The Sixth Circuit's answer
Sports events have only downstream economic consequences, not the intrinsic financial link required for swaps, the court ruled.

> Kalshi's sports-event contracts have only downstream economic consequences, assuming they have the potential to cause economic consequences at all
## States win two of three cases
This is the third federal appeals court to rule on the question. States won in the Sixth and Ninth Circuits but lost in the Third Circuit.
## Kalshi disputes the ruling
Kalshi said it disagrees with the decision and claims the circuit split proves states cannot regulate prediction markets fairly.

> The ruling shows exactly why a state-by-state patchwork doesn't work
## Supreme Court may settle it
New Jersey asked the Supreme Court to resolve the conflict between circuit courts. A Fourth Circuit case involving Maryland is still pending.
## Key takeaway

The Sixth Circuit Court of Appeals ruled that Kalshi's sports betting contracts are not federally regulated swaps, allowing states to enforce their own gambling laws against the prediction market.