Kalshi Loses Big as Appeals Court Lets Ohio and Tennessee Treat Sports Bets as Gambling

Kalshi's core pitch is that a bet on a football game is really a federally regulated financial product. On September 25, a federal appeals court said that is not good enough to keep state gambling regulators away.

A unanimous three-judge panel of the 6th US Circuit Court of Appeals ruled that Ohio and Tennessee may apply their gambling laws to Kalshi's sports-event contracts. The decision reverses a Tennessee federal judge who had sided with Kalshi and keeps in place an Ohio ruling that favored the state.

Swap or wager

Kalshi's argument rests on the Commodity Exchange Act. If its contracts count as "swaps," the CFTC has exclusive jurisdiction and states have no say. The panel found Kalshi had not shown its sports contracts meet the swap definition. It then went further: even if they were swaps, the court said, the law neither expressly nor implicitly preempts Ohio or Tennessee gambling rules.

That second holding is the one that stings. It undercuts the CFTC too, which has sued nine states claiming exclusive authority over these markets.

Sports are Kalshi's cash cow, and the ruling could hand a roadmap to states that do not allow legal sports betting at all, such as California, to ban the contracts outright. It lands after Kalshi's loss in the 9th Circuit, and the company is fighting more than a dozen state lawsuits plus tribal suits.

The states push harder

Tennessee Attorney General Jonathan Skrmetti said Kalshi had tried an end-run around the state's sports-gambling rules and taxes, Cryptopolitan reported. Ohio's Casino Control Commission had already issued a cease-and-desist, accused Kalshi of offering products to people under 21, and warned licensed sportsbooks against partnering with it.

Kalshi spokesperson Dani Lever said the company disagrees, calling a state-by-state patchwork unworkable and arguing that Congress created a single federal regulator for a reason.

The ruling is not a nationwide ban, not the Supreme Court's last word, and not a finding that every event contract is gambling. But it arrives as Kalshi, which has raised about $2.6 billion, has been in talks at a valuation around $40 billion, a price built largely on the sports business that two states can now police like any other bookie.