Where the Answer Lives

30 September 2026. Court filings, dockets and figures are as of the dates stated in the text.

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On 25 September the Sixth Circuit became the second federal appeals court to rule against Kalshi. The more consequential part is the reasoning. Having found that Kalshi had not shown its sports contracts were swaps, the court added that Kalshi would still be unlikely to succeed if they were.

On our reading, that second step changes what the Commodity Futures Trading Commission can do for Kalshi's sports business. The Commission keeps the power to refuse. It is also trying to approve, by suing states, and it has won some early rounds. Within the Sixth Circuit, and against general gambling laws, approval is now an argument the Commission has to win in court rather than a power the statute gives it. A national answer has to come from the Supreme Court or from Congress.

What the Sixth Circuit Held

The opinion, by Judge Julia Smith Gibbons for a three-judge panel with no separate opinion, decided appeals from Ohio and Tennessee together. It holds two things. Kalshi "has not shown that its sports-event contracts satisfy the statutory definition of a 'swap'". And, in the alternative, "even assuming that Kalshi's sports-event contracts are swaps, we alternatively hold that the CEA neither expressly nor impliedly preempts Ohio's or Tennessee's gambling laws."

The court upheld Ohio's refusal of a preliminary injunction, vacated the injunction Kalshi had won in Tennessee, and sent both cases back for further proceedings. This is a preliminary ruling, not a final one. What the court found is that Kalshi "has failed to establish a likelihood of success under all preemption principles". The decision binds one circuit, and the full court could still be asked to rehear it.

The Second Holding, and a Correction

The first holding is about Kalshi's contracts. The second is about the statute, which is why it reaches further, and it requires Tessera to correct its own record.

Tessera's piece of 8 September, The Answer Arrived Twice, quoted New Jersey's petition to the Supreme Court, which framed the question as "whether Congress federalized a multi-billion-dollar sports-betting industry via a single word and its definition—'swap'—in Dodd-Frank." The same piece stated that "Section 2 of the Commodity Exchange Act expressly preempts state regulation of swaps traded on a designated contract market", and stated it as settled law. It was a contested reading, and the Sixth Circuit has now rejected it. The court reads the provision as one that "identifies the governing agency (the CFTC rather than the SEC or a state regulator), not the governing law." In this circuit, the single word the petition asks about does not displace a state's general gambling laws.

The court's reasoning turns on which branch has to speak. Gambling is an area of "traditional state authority", and the court notes that the Supreme Court requires "Congress to enact exceedingly clear language if it wishes to significantly alter the balance between federal and state power". The Commodity Exchange Act's exclusive-jurisdiction clause, it holds, "does not meet that high bar with respect to state gambling laws." The laws of Ohio and Tennessee are general betting statutes, which "do not directly regulate DCMs but have only incidental effects on them." The court separated them carefully from a Minnesota statute aimed specifically at prediction markets, which a district court has found likely preempted in part.

What the CFTC Can Still Do

Refusal is untouched. The court accepts that "Kalshi is correct that the CFTC has the discretion to prohibit such contracts. But that does not mean that the CFTC has the sole discretion to do so."

Approval is harder, and the Commission is pursuing it anyway. By its own account it has sued nine states since April: Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin. In Rhode Island it did so by moving to intervene in a suit an exchange had brought. What it has done so far:

• Arizona: a federal court granted the CFTC a preliminary injunction against the state on 5 May, having denied Kalshi's own motion a month earlier. Arizona's appeal is pending in the Ninth Circuit.
• Minnesota: in July, in the federal government's own suit, a federal court held that a state statute aimed specifically at prediction markets was likely "at least in part expressly preempted". The Sixth Circuit expressed no opinion on that decision but said its own conclusion was "consistent with its reasoning".
• Emergency orders: in July, after a Michigan state court directed Kalshi to cancel certain executed trades involving Michigan residents, the Commission stayed the rule change Kalshi proposed in response and ordered the trades honored. In August, after New York's attorney general sued Kalshi in state court, it ordered the exchange to keep operating under the federal rules.
• Rulemaking: in June it proposed rules for judging event contracts that involve gaming.

What the Commission cannot supply, as we read the opinion, is the clear statement from Congress that the Sixth Circuit found missing. The court did not rule on the Commission's suits or on its proposed rules. It did hold that the exclusive-jurisdiction clause falls short of that bar for general gambling laws, and it rejected an argument built on the same impartial-access rules the Commission cited in its Michigan order, finding them "about economic rather than geographical impartiality". Michigan and Kentucky both sit in the Sixth Circuit. The Commission also took part in both appeals Kalshi has lost: CFTC lawyers are listed among counsel for amici in the Ohio appeal, and in the Ninth Circuit's Nevada case, decided on 28 August, the Commission appeared as amicus and argued.

That is the structure. The agency can prohibit the contracts nationally on its own decision. Permitting them, it has to defend state by state. It has done so with some success in district courts, against Arizona's gambling laws in the Ninth Circuit's territory and against a Minnesota law aimed at prediction markets. Against general gambling laws in the Sixth Circuit, it now has to win an argument an appeals court has rejected. The opinion does not decide whether a CFTC rule could do what, on this court's reading, the statute does not. Our reading is that a rule cannot supply a clear statement Congress did not make.

How Much of Kalshi the Ruling Reaches

The case concerns sports-event contracts. The opinion records that Kalshi "initially offered event contracts across a variety of fields, including climate, crypto, economics, politics, and popular culture." Sports, though, is most of the business by fees. Fortune reported on 24 September, citing PitchBook, that sports accounted for 69.9% of Kalshi's event fees in the year to that date, and 82.4% including exotics.

The definition still decides which contracts count as swaps at all. The court's test is whether events are "sufficiently associated with financial consequences such that it would be commonly understood that hedging risk and deriving pricing information about those events could promote market stability". Responding to an amicus brief filed in Kalshi's support, it found it "difficult to see how determining the probability that a certain number of corner kicks will be taken in a given soccer game—or that a 30-leg parlay will hit" would serve those goals. Whether Kalshi's other contracts pass the test was not decided here, and nothing in this piece should be read as deciding it.

Where the Split Stands and What Comes Next

By the Sixth Circuit's own account, the appeals courts now divide this way:

• Third Circuit: ruled for Kalshi, over a dissent.
• Ninth Circuit: ruled against Kalshi on 28 August.
• Sixth Circuit: ruled against Kalshi on 25 September.
• Fourth Circuit: appeal pending.

Every one of these rulings is at the preliminary-injunction stage. In the Nevada case, Kalshi petitioned for panel rehearing and rehearing en banc on 9 September. At the Supreme Court, Kalshi's response to New Jersey's petition is due on 9 November, after an extension granted on 22 September, and the National Council of Legislators from Gaming States filed a brief on 22 September as well.

The 8 September piece said that "the realistic path to a national answer runs through a discretionary decision by nine people about whether to hear the case at all." The Sixth Circuit's ruling strengthens that. The same piece declined to predict whether the Court would take the case, noting that most petitions are denied, and this piece does not predict it either. A deeper split gives the Court a reason to grant review. It does not guarantee that it will.

Where That Leaves the Question

This piece holds no view on who should win, and we are still not qualified to have one. Tessera's piece of 20 August, Priced in a Room, said of Kalshi's position: "The moat is not imaginary; it is simply not yet adjudicated." That still holds. What 25 September changed is where the adjudication can happen.

The conclusion here is narrower. As we read the opinion, for Kalshi's sports business the regulator can prohibit the contracts on its own authority, but against a state's general gambling laws it cannot settle the question in Kalshi's favor on that authority alone, however many states it sues. If the answer is yes, it will come from nine justices or from Congress.

Sources: KalshiEX LLC v. Schuler and KalshiEX LLC v. Orgel, Nos. 26-3196/5235 (6th Cir. 25 September 2026), opinion 26a0272p.06, read in full from the court's website, for the holdings, the disposition, every quotation from the court above, the panel, the account of the Third, Ninth and Fourth Circuits, the Minnesota footnote, and the listing of Commodity Futures Trading Commission counsel among counsel for amici curiae. Supreme Court of the United States, docket No. 26-299, Flaherty v. KalshiEX, LLC, and the petition for a writ of certiorari filed on 2 September 2026, read 30 September 2026. Commodity Futures Trading Commission press releases 9206-26 (2 April 2026), 9218-26 (24 April), 9220-26 (28 April), 9233-26 (19 May), 9238-26 (28 May), 9249-26 (10 June), 9251-26 (12 June), 9260-26 (23 June), 9267-26 (14 July) and 9281-26 (11 August), read in full 30 September 2026, for the suits against states (the list of nine as given in 9267-26 and 9281-26), the proposed rule, and the two emergency orders. KalshiEX LLC v. Johnson, No. 2:26-cv-01715 (D. Ariz.), docket entries for the order of 8 April 2026 denying Kalshi's motion, the order of 5 May 2026 granting the CFTC's motion for a preliminary injunction, and the state defendants' notice of interlocutory appeal of 6 July 2026; and KalshiEX, LLC v. Assad, No. 25-7516 (9th Cir.), docket entry for Kalshi's petition of 9 September 2026; both read from CourtListener's RECAP archive, not from PACER. The Ninth Circuit's opinion in Assad, 28 August 2026, for the date and the CFTC's appearance as arguing counsel for amicus curiae. The Minnesota decision is as described in footnote 12 of the Sixth Circuit's opinion. Jeff John Roberts, Fortune, 24 September 2026, for PitchBook's figures on the sports share of Kalshi's event fees. Tessera, "The Answer Arrived Twice", dated 8 September 2026, and "Priced in a Room", 20 August 2026, both as published at blog.tessera.pe, for the passages quoted. Figures are as of the dates given.

This is market commentary, not investment advice or legal advice. It is not a recommendation to acquire, hold or redeem any Tessera product, or to take or avoid exposure to any company mentioned.

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