Sixth Circuit rules Kalshi must block users in Ohio, Tennessee after preemption loss
In brief
- Sixth Circuit ruled Sept. 25 that Ohio and Tennessee can enforce gambling laws against Kalshi's sports contracts
- Kalshi's preemption claim rejected; state-by-state compliance does not conflict with federal exchange duties
- Geofencing identified as viable technical solution for state-level compliance
- Sports contracts represent 95% of Kalshi's 2025 revenue; 69% of retail demand from unregulated sportsbook states
Geofencing as the path forward
The court pointed to geofencing as a workable way to satisfy both federal and state requirements. Kalshi had argued that segmenting access by geography would be technically difficult, time-consuming, and expensive. The judges responded bluntly: expensive does not mean impossible.
The court affirmed an Ohio ruling against Kalshi and vacated the preliminary injunction that had shielded it from enforcement in Tennessee. The decision now governs federal courts across Ohio, Tennessee, Michigan, and Kentucky.
In Michigan, a separate state-court injunction already requires Kalshi to keep covered sports contracts unavailable to users located in the state. Violations carry penalties of up to $500,000 a day.
Revenue exposure and circuit splits
The stakes are substantial. More than 90% of Kalshi's trades and 95% of its revenue in 2025 are tied to sports contracts. Eilers & Krejcik Gaming models that 69% of Kalshi's retail sports demand comes from states without legal online sportsbooks. California and Texas alone account for 44% of that retail sports demand.
Both California and Texas have legalized sports wagering and regulate it with a minimum age of 21, geographic limits, licensing, taxes, and consumer protections. The Ninth Circuit ruled against Kalshi's preemption argument in Nevada on August 28, and California falls within the Ninth Circuit. Texas belongs to the Fifth Circuit, which has yet to rule on the question.
Kentucky sued Kalshi and Polymarket earlier in the year. States collected more than $3.2 billion in sports-gambling tax revenue in fiscal 2025.
Alternative grounds strengthen state position
The court added an alternative holding: even if the contracts were swaps, federal commodities law would leave Ohio and Tennessee gambling statutes in force. That second finding gives states within the circuit two separate paths to win—a structural advantage that complicates any future appeal or legislative fix Kalshi might pursue.
