- A three-circuit split is now entrenched on swap status and preemption. The Third, Sixth and Ninth Circuits agree on some basics but differ on whether sports event contracts qualify as swaps and whether federal law displaces state gambling restrictions.
- The Sixth Circuit’s “inherent financial consequence” test narrows swap coverage. The Sixth and Ninth Circuits require the triggering event to be intrinsically tied to financial consequences, not merely capable of producing downstream economic effects.
- CFTC rulemaking may not end the fight — state-law risk can remain. Pending federal rules could clarify whether event contracts are swaps, but the Sixth Circuit’s independent rejection of broad preemption means platforms may still face state enforcement even with DCM registration and self-certification.
Article
Where the 3 Prediction Market Appellate Rulings Diverge
Law360
Written by Levi Giovanetto
October 9, 2026Estimated Read Time: 1 min
Key Takeaways
In article published in Law360, Levi Giovanetto looked at a widening split among federal appeals courts over whether sports-based prediction market contracts fall under federal derivatives law and whether federal authority preempts state gambling enforcement. In KalshiEX LLC v. Schuler, the U.S. Court of Appeals for the Sixth Circuit held Sept. 25 that Kalshi did not show its sports event contracts qualify as “swaps” under the Commodity Exchange Act. The court also said Ohio and Tennessee gambling laws would not be preempted even if the contracts were swaps, affirming the denial of preliminary relief in Ohio and vacating an injunction in Tennessee.
The ruling deepens disagreement with earlier decisions. The Third Circuit sided with Kalshi in April in Kalshi v. Flaherty, while the Ninth Circuit ruled against Kalshi in August in Kalshi v. Assad.
Read more here.