Kalshi Faces Regulatory Uncertainty as Appeals Courts Split on Sports Contracts

Kalshi, a prediction market regulated by the Commodity Futures Trading Commission, is facing mounting legal challenges regarding its sports-event contracts. Throughout 2026, the company has argued that its federal oversight should preempt state gambling regulations, but recent court decisions have increasingly challenged this position.

On September 25, 2026, the US Court of Appeals for the Sixth Circuit ruled against Kalshi, allowing Ohio and Tennessee to enforce their respective gambling laws against the platform's sports contracts. The court determined that these contracts do not qualify as swaps under the Commodity Exchange Act and concluded that federal regulation does not automatically shield the products from state-level oversight.

This ruling follows a similar decision from the Ninth Circuit on August 28, 2026, which sided with Nevada in its dispute with the company. These outcomes contrast with an April 2026 ruling from the Third Circuit, which favored Kalshi in a case involving New Jersey. Additionally, the company secured a district court victory in Illinois, though this does not resolve the broader conflict between the appellate courts.

With more than 20 states currently involved in litigation, the inconsistent rulings have created a fragmented regulatory environment. Kalshi has utilized geofencing to restrict access to its sports contracts in states where courts have upheld local gambling statutes, impacting its retail operations.

The ongoing legal battle centers on whether sports-based event contracts fall under exclusive federal jurisdiction or remain subject to state authority. The split among the Third, Sixth, and Ninth Circuits has raised the possibility that the US Supreme Court may eventually intervene to settle the matter. Until then, Kalshi continues to operate under varying rules depending on the jurisdiction.