Background
KalshiEX operates a Commodity Futures Trading Commission-regulated designated contract market where customers trade event contracts whose payouts depend on whether specified events occur. In 2025, Kalshi began offering contracts tied to sporting events, including game outcomes, individual occurrences during games, and parlays. Kalshi did not obtain state sports-wagering licenses or comply with state requirements governing matters such as bettors’ ages, locations, taxation, and consumer protection.
After Tennessee regulators directed Kalshi to stop offering sports-event contracts in the state, Kalshi sued Tennessee officials and argued that the Commodity Exchange Act gave the CFTC exclusive jurisdiction over the contracts and therefore preempted Tennessee’s gambling laws. The district court granted Kalshi a preliminary injunction against the state officials. The Sixth Circuit considered Tennessee’s appeal alongside Kalshi’s appeal from an Ohio court’s denial of similar relief.
The Court’s Holding
The Sixth Circuit held that Kalshi had an equitable cause of action to seek prospective relief against state officials, but had not shown a likelihood of success on its preemption claim. The court concluded that Kalshi had not demonstrated that its sports-event contracts meet the Commodity Exchange Act’s statutory definition of a “swap” and therefore had not established that the contracts fall within the CFTC’s exclusive jurisdiction.
The court alternatively held that even if the contracts were swaps, the Commodity Exchange Act neither expressly nor impliedly preempts Tennessee’s or Ohio’s gambling laws as applied to Kalshi. The federal statute displaces state authority to directly regulate and enforce rules governing transactions on designated contract markets, the court reasoned, but it does not broadly eliminate state laws addressing gambling. Compliance with both federal and state law was not impossible, and the state laws did not obstruct Congress’s purposes; geofencing or limiting where contracts are offered may be difficult or expensive, but that does not establish impossibility.
Because Kalshi failed to show likely success on the merits, the court did not address the remaining preliminary-injunction factors. It vacated the Tennessee preliminary injunction and remanded for further proceedings. In the consolidated Ohio appeal, it affirmed the denial of Kalshi’s requested preliminary injunction.
Key Takeaways
- Kalshi did not establish that its sports-event contracts are “swaps” covered by the CFTC’s exclusive jurisdiction under the Commodity Exchange Act.
- Even assuming the contracts are swaps, the Commodity Exchange Act does not expressly, through field preemption, or through conflict preemption displace Tennessee’s or Ohio’s generally applicable sports-gambling laws.
- A federally regulated designated contract market is not necessarily insulated from state gambling requirements merely because a contract is traded on its exchange.
Why It Matters
The decision permits Tennessee to resume enforcing its sports-wagering laws against Kalshi while the litigation continues and supports states’ authority to apply licensing, age, location, taxation, and consumer-protection rules to sports-event contracts. It also deepens a circuit split over whether the Commodity Exchange Act preempts state regulation of Kalshi’s sports contracts.