US Sixth Circuit Court rules Kalshi sports contracts are not swaps, subject to state regulation

BlockBeats news, September 26 - A panel of the U.S. Court of Appeals for the Sixth Circuit ruled on September 25 that sports-related event contracts on prediction market platform Kalshi are not swaps and should therefore be governed by state regulations rather than the rules of the federal Commodity Futures Trading Commission. The ruling involves two cases Kalshi filed against regulators in Ohio and Tennessee. Kalshi sought injunctions to block the two states from prosecuting, but an Ohio federal court denied its motion while a Tennessee federal court granted it. The panel held that although Kalshi's sports event contracts are conditioned on the occurrence of an "event," these contracts do not depend on events with "potential financial, economic, or commercial consequences" and therefore do not meet the statutory definition of a swap. Citing the example of the New York Giants winning the Super Bowl, the ruling noted that if the "event" is defined as the Giants winning, then the victory is "the event having occurred"; if the event is actually the game itself, then the Giants winning is merely an outcome, and the statutory text does not explicitly require excluding outcomes from the definition of an event, so the court declined to add such a limitation on its own.

This is the appellate court's latest ruling in the legal battle between states and prediction market providers, further increasing the likelihood that the Supreme Court will ultimately intervene. Previously, the Third Circuit ruled that the CFTC has jurisdiction over prediction markets, while the Eighth Circuit ruled that sports-related contracts are not swaps. The Third Circuit case has already been appealed to the Supreme Court. Since the rise of prediction markets after the 2024 election, states have been trying to bring them under state regulatory frameworks, arguing that these markets offer the same products as state-licensed platforms without paying state taxes, and are often open to 18-year-olds, whereas most state event prediction operators require users to be 21.