Appeals Court: Kalshi Must Block Traders in Ohio, Tennessee

The Sixth Circuit ruled Sept. 25 that Ohio and Tennessee can apply their gambling laws to Kalshi’s sports contracts, directing the CFTC-regulated exchange to block users located in those states from trading sports markets. The court affirmed an Ohio ruling against Kalshi, vacated a Tennessee preliminary injunction, and returned both cases to lower courts. The decision governs preliminary-injunction practice in federal courts across Ohio, Tennessee, Michigan and Kentucky.

The three-judge panel rejected Kalshi’s primary argument that its sports contracts qualify as “swaps” governed exclusively by federal commodities law. The opinion added an alternative holding that, even if the contracts were swaps, Ohio and Tennessee gambling statutes are not preempted by federal law.

Kalshi had argued that duties tied to its status as a designated contract market-such as impartial access and national order matching-make state-by-state restrictions impossible to follow. The panel read those federal duties as applying to the markets an exchange chooses to list, and it noted existing tools that allow state-specific limits. The court wrote, “expensive does not mean impossible,” pointing to geofencing and state access controls as feasible compliance methods.

A Michigan state-court order from Sept. 1 already requires Kalshi to block sports contracts for users verified inside Michigan through a qualifying third-party geolocation provider. Kalshi’s app continues to operate in Michigan, but sports markets disappear for anyone inside state lines. Violations of the Michigan order carry potential penalties up to $500,000 per day.

Industry modeling by Eilers & Krejcik Gaming estimates about 69% of Kalshi’s retail sports demand comes from states that do not permit legal online sportsbooks, with California and Texas accounting for roughly 44% of that modeled demand. An appellate opinion cited company figures indicating more than 90% of Kalshi’s trades and about 95% of its 2025 revenue were tied to sports contracts. Eilers & Krejcik also estimated that restricting half of Kalshi’s non-sportsbook footprint would cover geography holding about 34.5% of its modeled retail sports demand.

The rulings deepen a circuit split over preemption. The Third Circuit sided with Kalshi in New Jersey in April. The Ninth Circuit rejected Kalshi’s preemption argument in Nevada in August. The Sixth Circuit’s decision leaves two circuits ruling against Kalshi, one in favor, and a Fourth Circuit appeal from Maryland still pending. New Jersey filed a petition to the U.S. Supreme Court on Sept. 2; Kalshi’s response to that petition is due Nov. 9.

Court opinions and outside analysts describe a likely state-by-state permissions matrix: some states could bar sports contracts, others could require licenses, a 21-and-over age limit, taxes, or specific geolocation checks. Geographic segmentation would narrow the pool of eligible traders in any single market and could affect liquidity and contract offerings.

Major sportsbook operators already run state-by-state compliance systems and offer prediction-style sports products where their sportsbooks are not available. Industry data show $31.1 billion in U.S. sports prediction-market execution volume through Sept. 20 in the third quarter, and one platform reached roughly 22% of U.S. sports contract volume in September. The pending appeals and any Supreme Court action will determine whether Kalshi and similar platforms operate under a single federal rulebook or within separate state regimes.