A panel of the Sixth Circuit Court of Appeals ruled Friday that prediction-market provider Kalshi's sports-related event contracts are not swaps under federal law, meaning they are subject to state gaming regulations rather than oversight by the Commodity Futures Trading Commission (CFTC).
The ruling addresses two cases brought by Kalshi against regulators in Ohio and Tennessee. An Ohio federal court had denied Kalshi's motion for an injunction, while a Tennessee federal court granted it. The Sixth Circuit panel agreed that Kalshi had standing to bring the cases but disagreed that the contracts in question were federally regulated swaps.
"While we agree with Kalshi that its sports-event contracts are conditioned on the occurrence of 'event[s],' we conclude that Kalshi's contracts do not depend on events that are 'associated with a potential financial, economic, or commercial consequence' within the meaning of the statute," the ruling said.
The panel used the example of the New York Giants winning the Super Bowl to illustrate the definitional difficulty. If the "event" is defined as the Giants' victory, then the event has occurred when they win. But if the event is defined as the game itself, then the Giants' win is merely an outcome of that event. "The proper terminology, then, seems to turn on how the event itself is defined," the ruling noted. "And because nothing in the statutory text provides a clear indication that the event must be defined to exclude outcomes, we decline to read such a limitation into the statutory definition ourselves."
States have sought to regulate prediction markets offering sports-related contracts since the sector grew rapidly after the 2024 election. They argue these platforms compete directly with state-licensed gambling operators while offering identical products, and raise two further concerns: federally regulated platforms do not pay state taxes, and prediction markets often allow users as young as 18, compared with the 21-year-old threshold common at state-regulated gambling operators.
The Sixth Circuit decision adds to an existing circuit split. The Third Circuit previously ruled that the CFTC does have jurisdiction over prediction markets, while the Eighth Circuit held — like the Sixth — that sports-related contracts are not swaps. The Third Circuit's decision has already been appealed to the U.S. Supreme Court, and the deepening split strengthens the case for the high court to resolve the question.
Kalshi co-founder and CEO Tarek Mansour was identified in connection with the ongoing legal proceedings.
