A Sixth Circuit Court of Appeals panel has ruled that Kalshi’s sports-related event contracts are not swaps under federal law, placing them within the scope of state gaming regulations rather than the Commodity Futures Trading Commission’s (CFTC) federal rules.

The three-judge panel issued its decision Friday in two cases brought by Kalshi against regulators in Ohio and Tennessee. The prediction market operator had sought injunctions preventing the states from taking enforcement action against its sports contracts. An Ohio federal court rejected Kalshi’s request, while a Tennessee court had previously granted it.

The ruling is the latest development in a broader dispute between prediction market operators and state regulators over sports-related contracts. The disagreement has grown since prediction markets expanded after the 2024 U.S. election, with states arguing that these platforms compete with licensed gambling businesses and offer contracts similar to those available through sportsbooks and betting apps.

State officials have also pointed to differences in taxation and minimum-age requirements. Federally regulated prediction markets generally do not pay state gambling taxes, while state-licensed gambling operators do. Prediction platforms may also allow customers to participate from age 18, whereas many state gambling businesses require customers to be at least 21.

The Sixth Circuit agreed that Kalshi had standing to bring its legal challenges but rejected its argument that the sports contracts qualified as federally regulated swaps.

At the center of the decision was the statutory definition of an event contract. The panel considered whether the contracts depend on events associated with a potential financial, economic or commercial consequence and concluded that Kalshi’s sports contracts did not meet that standard.

The judges used a New York Giants Super Bowl scenario to explain their interpretation. If the event is defined as the Giants winning the Super Bowl, the victory itself is the event. If the event is defined as the game being played, the Giants’ victory is instead the outcome.

The panel said the relevant statute does not clearly require an event to be separated from its outcome. Because Congress had not expressly imposed such a limitation, the judges declined to add one to the statutory definition.

The decision also deepens a split among federal appeals courts over prediction market regulation. The Third Circuit has ruled that the CFTC has jurisdiction over prediction markets, while the Eighth Circuit has concluded that sports-related contracts do not qualify as swaps.

With the appeals courts divided, the dispute could ultimately reach the U.S. Supreme Court. The Third Circuit case has already been appealed to the high court, potentially giving the justices an opportunity to resolve the conflict over federal commodities regulation and state gambling laws.