Sixth Circuit blocks Kalshi from operating in Ohio and Tennessee

• The Sixth Circuit affirmed an Ohio ruling against Kalshi and vacated its Tennessee injunction, sending both cases back to lower courts.
• EKG models 69% of Kalshi’s retail sports demand as coming from states without legal online sportsbooks, with California and Texas alone accounting for 44%.
• New Jersey petitioned the Supreme Court on September 2 to resolve the circuit split; Kalshi’s response is now due November 9 after an extension.

• 69% share of Kalshi retail sports demand tied to non-sportsbook states
• $3.2B Ohio and Tennessee sports-gambling tax revenue in fiscal 2025
• $31.1B Q3 US sports prediction-market volume through Sept. 20

A unanimous Sixth Circuit panel held Friday (September 25) that Kalshi failed to show its sports contracts meet the Commodity Exchange Act’s definition of a swap, undercutting its claim to exclusive CFTC oversight. The court added a second, independent finding that even if the contracts were swaps, federal commodities law would still leave Ohio and Tennessee’s gambling statutes intact.

That double holding gives states within the circuit two separate paths to prevail, since a future win for Kalshi on the swap question alone would not disturb the preemption ruling.

Sixth Circuit Tells Kalshi Geofencing Is Not Impossible

Kalshi argued its duties as a federally designated contract market, including impartial access and national order matching, made state-by-state compliance unworkable. The panel disagreed, reading those federal requirements as applying only to whatever markets an exchange chooses to list, leaving room to offer contracts in some states and withhold them in others.

Expensive does not mean impossible.

Sixth Circuit panel

The court pointed to Michigan as proof of concept. A September 1 state-court injunction there already requires Kalshi to block covered sports contracts for users verified by geolocation as inside the state, with penalties running up to $500,000 a day for violations. The Kalshi app still functions in Michigan; its sports markets simply vanish at the state line.

DraftKings and FanDuel Already Run the Same State-by-State Model

Ohio and Tennessee both license and tax sports wagering, applying a 21-and-over age floor, geographic limits and consumer protections that Kalshi currently operates outside of. DraftKings runs DraftKings Predictions in California and Texas, where its licensed sportsbook is unavailable, and FanDuel Predicts operates the same way, pulling contracts once a state legalizes conventional sportsbooks.

Both companies already built the geofencing systems the Sixth Circuit described as workable.

EKG counted $31.1 billion in US sports prediction-market execution volume through September 20 in the current quarter, with Polymarket’s US exchange reaching roughly 22% of sports contract volume in September.

EKG’s own research finds prediction markets displaced only 2% to 4% of sportsbook handle in the most competitive legal betting states, evidence that most of the growth came from access rather than stolen sportsbook share.

Circuit Split Now Stands at Two Against Kalshi, One in Favor

The Third Circuit sided with Kalshi in New Jersey in April, finding a reasonable chance federal law preempts state gambling rules. The Ninth Circuit ruled the opposite way in Nevada on August 28, and the Sixth Circuit has now joined it for Ohio and Tennessee.

A Fourth Circuit appeal involving Maryland remains pending and could shift that balance again.

New Jersey asked the Supreme Court on September 2 to resolve the split, and Kalshi’s response, originally due October 8, is now due November 9 following a September 22 extension. The Court has not decided whether to hear the case.

Sports contracts generated more than 90% of Kalshi’s trades and 95% of its 2025 revenue, according to figures cited in the Ninth Circuit’s August opinion, making the outcome central to the company’s business model rather than a peripheral product line.

The CCS read. The real signal here is regulatory arbitrage closing, not litigation risk. Kalshi built its valuation on trading one federal rulebook against fifty state gambling regimes; DraftKings and FanDuel already priced that gap into their own prediction products. Investors watching Kalshi’s next funding round should track whether its addressable-market math still assumes national access, because two circuits now say it can’t.

Tennessee is the first concrete test of Friday’s ruling, with regulators regaining enforcement authority now that the injunction is vacated, while the Supreme Court’s decision on whether to hear New Jersey’s petition remains the open question that could still override both the Sixth and Ninth Circuit outcomes.

Original reporting: cryptoslate.com