Kalshi has asked the Sixth Circuit to recognize its sports‑event contracts as financial instruments governed by federal commodities law, arguing that state regulators should not interfere with these trades.
The three‑judge panel, led by Judge Eric Clay, scrutinized Kalshi’s preemption claim, questioning whether the contracts resemble the swaps Congress envisioned when passing Dodd‑Frank and whether state gambling statutes could still apply.
Kalshi contended that a nationwide exchange cannot function if each state imposes its own restrictions, insisting the Commodity Futures Trading Commission (CFTC) should set uniform rules for all participants.
Ohio’s counsel maintained that sports betting does not fit the legal definition of a swap, asserting that state gambling laws remain valid and that the exclusive‑jurisdiction clause does not automatically override state authority.
The court explored hypotheticals such as age limits and election‑related contracts, noting that if the CFTC permits a contract, a state could not independently prohibit it without challenging the agency through established administrative procedures.
Ohio argued that if Kalshi’s reading were correct, sports bets would have required federal regulation since about 2010, implying a long‑overlooked federal takeover of the industry.
Tennessee pointed out that even if some contracts qualify as swaps, state gambling statutes might still apply, and exclusive jurisdiction would not eliminate all state regulatory power.
Judge Clay emphasized that swaps involve the transfer of future financial risk, whereas many sports wagers lack a direct financial consequence and are primarily speculative.
Kalshi warned that the state argument could extend beyond sports, potentially bringing traditional commodities into the scope of gambling laws and altering settled legal principles.
The court thanked the parties for their arguments and indicated it would take the cases under advisement, with no decision issued at this stage.
