Securities Regulation Daily Wrap Up, FEDERAL PREEMPTION—6th Cir.: Kalshi challenges ruling that sports contracts aren’t swaps, (Oct 14, 2026)

By Anne Sherry, J.D.

The appellate panel split from other circuits in holding that the contracts are not swaps under the CFTC’s exclusive jurisdiction.

Kalshi is asking the Sixth Circuit to rehear a case involving state oversight of sports-related event contracts. A panel of that court ruled that the contracts are not “swaps” and do not fall within the CFTC’s exclusive jurisdiction. According to Kalshi, rehearing or rehearing en banc is appropriate because the court split from sister circuits and erred in its holdings that the Commodity Exchange Act does not preempt state gambling laws and that Kalshi’s contracts are not swaps (Plaintiff KalshiEX LLC’s Petition for Rehearing and Rehearing En Banc, KalshiEX LLC v. Schuler, No. 26-3196 (6th Cir. Oct. 9, 2026)).

Panel decision. A Sixth Circuit panel denied Kalshi’s request to enjoin enforcement of Tennessee and Ohio gaming laws by the states’ respective regulators.

The court made two findings on its way to concluding that Kalshi failed to establish a likelihood of success. First, Kalshi did not show that its sports event contracts satisfy the statutory definition of a “swap” so as to fall within the scope of the CFTC’s “exclusive jurisdiction.” Next, the panel rejected Kalshi’s argument that the contracts, even if not swaps, are subject to the CFTC’s exclusive jurisdiction under express, field, and/or conflict preemption.

The decision further widened a circuit split in which the Ninth Circuit similarly held that Nevada can enforce its gaming laws against Kalshi’s contracts, while the Third Circuit held that the CEA preempts New Jersey’s laws in relation to the contracts.

Circuit split. While the Ninth Circuit ruled against Kalshi, Kalshi argues in its petition for rehearing that that court’s reasoning “relied heavily on a soon-to-be-replaced CFTC regulation the court misconstrued... When the CFTC completes its rulemaking in the coming weeks, the Ninth Circuit’s regulation-based reasoning will no longer apply,” but its unwillingness to apply a presumption against preemption will stand.

The Sixth Circuit departed from its own precedent by applying a presumption against preemption, Kalshi argues.

Federal preemption. The petition highlights the CEA’s plain text granting the CFTC “exclusive jurisdiction” over agreements and transactions involving swaps or futures and traded on designated contract markets. According to Kalshi, the panel erred in holding that this grant allows for the application of “ancillary” state laws.

“If state laws banning contracts the CFTC has approved are merely ‘ancillary’ regulation, it is unclear what, if any, state regulation would be out-of-bounds,” Kalshi protests.

Congress never excepted “gambling” from CEA preemption and recognized that trading on nationwide exchanges offers hedging and price-discovery benefits that serve the national public interest, Kalshi says. It argues that its contracts serve that public interest, while state-regulated sports betting does not.

Swaps. Second, Kalshi sees error in the court’s holding that the sports contracts are not swaps. The panel interpreted the statute to require that the sports event be inherently “associated with a potential financial, economic, or commercial consequence,” not merely have a downstream financial effect.

Kalshi counters that “inherently” appears nowhere in the statute. The CEA requires only “potential” financial consequences, and sports events have actual financial consequences. Furthermore, “all consequences are ‘downstream’—that is what makes them consequences,” Kalshi writes. And the panel undermined its own conclusion by acknowledging that the statute specifically lists some swaps that are not intrinsically associated with financial consequences, like weather swaps or metal swaps.

The fact that the sports contracts are swaps does not render the CEA limitless, Kalshi argues. The requirement that retail swaps be traded on an exchange excludes sportsbook bets. The panel need not have feared that holding the event contracts to be swaps would expose off-exchange bettors to criminal liability: “State-regulated sports bets are not swaps subject to the CEA’s exchange-trading requirement, and neither Kalshi nor the CFTC has ever contended otherwise.”

And while Kalshi allows that some sports events may lack an association with financial consequences, it argues that is not a basis for categorically excluding all sports events from the definition of “swap.”

Partly in response to the Sixth Circuit panel’s decision, the CFTC issued an interim final rule confirming that a swap does not include non-traded contracts regulated as gaming or gambling under applicable state or tribal law.

The agency also published a notice of proposed rulemaking defining “swap” to include event contracts, including those based on sports-related events.

According to Kalshi, these rulemakings undermine the panel’s holding and independently warrant rehearing.

The case is No. 26-3196.

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