On Sept. 25, a panel of the U.S. Court of Appeals for the Sixth Circuit ruled that sports-related event contracts offered by prediction market platform Kalshi are not swaps. That means they fall under state law, not the rules of the Commodity Futures Trading Commission, or CFTC.
Ohio and Tennessee cases were both part of the ruling
The decision covered two cases Kalshi filed against regulators in Ohio and Tennessee. Kalshi had sought injunctions to stop the two states from suing or taking action against the company. A federal court in Ohio denied that request, while a federal court in Tennessee granted it.
Why the panel said the contracts do not meet the definition of a swap
The panel said Kalshi’s sports event contracts are conditioned on whether an 「event」 occurs, but those contracts do not depend on an event with 「potential financial, economic, or commercial consequences」. On that basis, the court found that the contracts do not fit the statutory definition of a swap.
The ruling used the New York Giants winning the Super Bowl as an example. If the 「event」 is defined as the Giants winning, then the win itself means the event occurred. If the event is instead the game itself, then the Giants winning is only a result of that game. The panel said the statutory text does not clearly require courts to exclude results from the definition of an event, and it refused to add that restriction on its own.
Appellate split keeps growing
The ruling is the latest appellate decision in the legal fight between states and prediction market providers. It also raises the odds that the U.S. Supreme Court will eventually step in.
Earlier, the Third Circuit held that the CFTC has jurisdiction over prediction markets. The Eighth Circuit, by contrast, held that sports-related contracts are not swaps. The Third Circuit case has already been appealed to the Supreme Court.
State regulators have been pushing for oversight
Since prediction markets gained momentum after the 2024 U.S. election, states have tried to bring them within state regulatory frameworks. States argue that these markets offer products similar to those available on state-licensed platforms but do not pay state taxes. They also often allow access for people age 18, while most state event-prediction operators require users to be 21.