Kalshi faces legal challenges as court battles escalate

Kalshi has spent much of 2026 arguing that its sports contracts belong to Washington, not to state gambling regulators. The federal appeals courts are increasingly unconvinced.

On September 25, 2026, the US Court of Appeals for the Sixth Circuit sided with Ohio and Tennessee. The ruling lets both states enforce their gambling laws against Kalshi’s sports-event contracts, and it lands only weeks after a similar loss out West.

What the Sixth Circuit actually decided

Kalshi is a prediction market regulated by the Commodity Futures Trading Commission (CFTC). Users trade contracts tied to the outcome of real-world events, including sports games.

The company’s core legal argument is about preemption. Because a federal regulator oversees it, Kalshi contends that state gambling statutes should not apply to its products.

The Sixth Circuit rejected that view on two fronts. First, it found that Kalshi’s sports-event contracts do not qualify as “swaps” under the Commodity Exchange Act (CEA), the federal statute that defines the products the CFTC governs.

Second, the court held that federal law does not override state rules on gambling. A CFTC-regulated label does not automatically shield a product from state oversight if that product looks like a bet on a game.

A growing split among the circuits

The Sixth Circuit decision did not arrive in isolation. On August 28, 2026, the Ninth Circuit ruled against Kalshi in a case involving Nevada, which had taken a similar position on the company’s sports contracts.

In April 2026, the Third Circuit handed Kalshi a favorable ruling in its fight with New Jersey. So depending on where a customer lives, the same contract can now be treated very differently by the federal courts.

Kalshi has also notched a district court victory in Illinois. That result offers the company some support, but it does not settle the broader conflict among the appeals courts.

More than 20 states are now involved in litigation over Kalshi’s offerings. The divergent outcomes raise the possibility that the US Supreme Court could eventually take up the issue.

Why geofencing matters more than it sounds

Courts have upheld geofencing as a compliant approach for Kalshi. Geofencing uses a user’s location to block access to certain products in specific places.

For Kalshi, that means walling off its sports contracts in states where courts have allowed local gambling laws to apply. The company has had to limit its retail operations in several states as a result.

What this means for Kalshi and prediction markets

The legal question at the center of all this extends well beyond one company. Courts are effectively deciding whether event contracts tied to sports can be governed solely at the federal level through the CFTC, or whether states keep their traditional authority over gambling.

The key thing to watch is whether the split among the Third, Sixth and Ninth Circuits draws Supreme Court attention. Until then, Kalshi is stuck operating under different rules in different states.

Disclosure: This article was edited by Estefano Gomez. For more information on how we create and review content, see our Editorial Policy.