United States Court of Appeals for the Sixth Circuit Issues a Unanimous Ruling: Kalshi Sports Contracts Are Not Swaps; Gambling Laws in Ohio and Tennessee Apply to Prediction Markets. New Jersey has filed an appeal, and a decision from the Supreme Court is expected soon. (Background: Kalshi was accused of fake trading volume! Repeated orders totaling $5,500 accounted for 58%; the official rebuttal: algorithm issues are not wash trading.) (Additional context: The Sixth Circuit again calls out Kalshi! Sports contracts do not fall under CFTC jurisdiction—each state regulates its own.)   The U.S. Sixth Circuit Court of Appeals issued a unanimous decision on Friday, ruling that Kalshi’s sports contracts on its prediction market platform do not meet the definition of a swap; the gambling laws of Ohio and Tennessee can apply. This means Kalshi’s losses in both states are now settled, and the jurisdiction battle for prediction markets is increasingly headed to the Supreme Court. The three-judge panel unanimously agreed that Kalshi had not sufficiently shown that its sports event contracts meet the “swap” definition under the Commodity Exchange Act. The law defines swaps as contracts tied to events related to “potential financial, economic, or commercial consequences.” The court said this covers only events inherently tied to financial consequences—such as interest rate increases or debt defaults. The impact of sports games on sponsors, advertisers, and local businesses is “too indirect, too ambiguous, too speculative,” and therefore does not qualify. How the court ruled The court upheld the March decision by Ohio presiding judge Sarah D. Morrison, denying Kalshi’s request for a preliminary injunction. It also vacated the February injunction issued by Tennessee presiding judge Aleta A. Trauger, and remanded the case to the district court. Kalshi began listing sports event contracts in January 2025. The Ohio casino control commission demanded that it stop operating without a license, and Kalshi sued. In January, Tennessee’s sports betting commission also issued an order placing Nadex, run by Polymarket and Crypto.com, on its list. Kalshi spokesperson Dani Lever told Courthouse News the company disagrees with the ruling: “The law does not require that a swap have ‘inherent’ financial consequences—even if it did, sports obviously are not.” Lever said the decision shows that “fragmented rules across states don’t work…when rules change at every state border, the market can’t function, and that’s why Congress created a single federal regulator to set nationwide rules.” How “swap” is defined The dispute stems from the Dodd-Frank Act, which defines swaps as contracts involving events related to “potential financial, economic, or commercial consequences.” The court said the effects of sports games are too indirect and that even Kalshi’s “reference to a market” is not enough. In the opinion, Judge Julia Smith Gibbons wrote: “A market can’t possibly need to know the odds that a broadcaster will say random words on television.” The ruling noted that in early litigation Kalshi already conceded its sports contracts “have no inherent economic meaning.” A friend’s résumé of former CFTC Chair Gary Gensler mentioned that Kalshi’s interpretation would lead to “widespread ordinary gambling activity” being subject to criminal penalties, including “all sports bets between casinos, online sports betting platforms, or bar friends.” Cross-state jurisdiction battle: how states are moving As of the end of September, more than 12 states have filed lawsuits against Kalshi or taken enforcement actions. New Jersey won a Third Circuit ruling in April. Ohio and Tennessee won Sixth Circuit rulings in September, and Nevada won a Ninth Circuit ruling in August. Kalshi’s record across the three appellate circuits stands at 1 win and 3 losses. New Jersey Attorney General Jennifer Davenport had already asked the U.S. Supreme Court to review the Third Circuit’s decision on September 2. A Fourth Circuit ruling in Maryland is still pending. Kalshi’s data shows that trading volume reached $38.67 billion in August, indicating a rapid expansion of prediction markets. Follow-up to watch: prediction market expansion This ruling means the jurisdiction battle for prediction markets is moving toward the Supreme Court. With New Jersey, Ohio, and Tennessee each winning in different circuits, the Supreme Court’s final decision will determine where the rules for prediction markets in the U.S. go. If Kalshi wins, its sports contracts on prediction markets will be uniformly under CFTC jurisdiction. If the states win, prediction markets may need to operate under state licenses. Related coverage Sixth Circuit again calls out Kalshi! Sports contracts are not under CFTC jurisdiction—states regulate on their own Kalshi accused of fake trading volume! Repeated orders totaling $5,500 accounted for 58%; official rebuttal: algorithm issues are not wash trading CFTC warns about risks of assumed market manipulation! What if the president says something—might already be illegal North Carolina, the U.S., is the first to impose a 6% tax on prediction markets, effectively acknowledging federal jurisdiction >"Kalshi loses! Ohio and Tennessee appeal successfully—sports contracts on prediction markets don’t count as swap transactions"This article was first published on Dongqu BlockTempo (Dongqu DongQu—most influential blockchain news media).