Summary A federal judge refused to block Ohio from treating Kalshi’s sports contracts as sports betting. The court said these contracts are not swaps under federal commodities law. The judge rejected Kalshi’s argument that federal law overrides Ohio’s gambling rules. Other courts are split on this issue, and appeals are pending. For now, Ohio can move forward in enforcing Ohio’s gaming laws against Kalshi When financial markets and sports betting collide, the law often struggles to keep up. That’s exactly what happened recently when Kalshi, a federally regulated trading exchange, rolled out a new kind of product: contracts that pay out based on what happens in a sporting event. In Kalshi’s view, these contracts were financial instruments governed entirely by federal commodities law. To Ohio, they looked a lot like plain old sports gaming. And in a closely watched decision, a federal judge agreed with Ohio—at least enough to let the state continue enforcing its gambling laws while the lawsuit continues. Here’s what the ruling actually said, why it matters, and what it means for people in Ohio. What Kalshi Was Trying to Do Kalshi is a federally approved futures exchange through which people trade “event contracts”—essentially yes/no bets on real world outcomes. For years, those outcomes involved things like weather events, inflation numbers, or political developments. In early 2025, Kalshi began offering sports related event contracts. Users could trade on questions like which team would advance in a tournament or who would win a championship. Ohio’s Casino Control Commission took one look at this and said: that’s sports betting. Ohio law requires a state license to offer sports gambling and prohibits anyone under 21 from participating. Kalshi had neither a license nor those age protections. The Commission worked in good faith with Kalshi to resolve the issue, but ultimately warned Kalshi to stop offering sports event contracts to Ohio residents. Kalshi instead sued, arguing that federal commodities law overrides (or “preempts”) Ohio’s gambling rules. Kalshi asked the federal court in the Southern District of Ohio for a preliminary injunction—an emergency order blocking Ohio from enforcing its gaming laws while the case moved forward. The Court’s Core Decision The federal judge denied Kalshi’s request. That means Ohio can continue treating these contracts as sports betting and pursue its enforcement if Kalshi doesn’t comply with state law. To reach that decision, the court tackled two key questions. Are Sports Event Contracts Even Covered by Federal Commodity Law? Kalshi’s entire case rested on convincing the court that these sports contracts are “swaps”—a type of financial derivative Congress placed under exclusive federal oversight. The court wasn’t persuaded. While “swap” is broadly defined, the judge emphasized context: the law lists classic financial instruments like interest rate swaps, currency swaps, and weather derivatives—tools designed to manage price risk in real markets. Sports scores, the court said, simply don’t belong in that category. They have no direct connection to commodity prices or financial market stability, which is the whole point of federal regulation in this area. The judge also flagged the “absurd” result of Kalshi’s interpretation: if every contract tied to a sports outcome counted as a swap, then all sports bets would suddenly fall under federal commodities law and every sportsbook in America would have to become a federally regulated exchange. Nothing in the statute or its history suggests Congress meant that. Bottom line: the court concluded these sports event contracts are not swaps. And if they’re not swaps, Kalshi can’t use federal law to shield itself from state regulation. Even If Federal Law Did Apply, Would It Override Ohio’s Gambling Rules? The court then explained why Kalshi would still lose even if its contracts were considered swaps. Federal law can override state law, but courts start with a strong assumption that states remain free to regulate areas they’ve traditionally governed—like gambling. Nothing in the Commodity Exchange Act (the federal statute Kalshi relies on) shows a clear intent to strip states of their authority over sports betting. In fact, Congress wrote the law in a way that specifically leaves room for state regulation outside the narrow core of true financial derivatives. Kalshi argued that Ohio’s rules conflict with federal requirements—for example, federal rules requiring exchanges to give “impartial access,” which Kalshi said would clash with Ohio’s geographic restrictions on who can engage in sports gaming with Ohio licensees. But the court dismissed this as merely an unsupported conclusory statement. A National Issue With Growing Tension Ohio is not the only battleground. Courts around the country have reached different conclusions on whether Kalshi’s sports contracts qualify as swaps, and multiple appeals are underway. Those appellate decisions—or ultimately Congress or the United States Supreme Court—may determine whether sports-related event contracts belong in financial markets, gambling markets, or somewhere in between. The Big Picture The ruling doesn’t end the lawsuit, but it sends a clear signal: just calling something a financial “event contract” doesn’t automatically pull it into federal jurisdiction. When the real world effect looks like sports betting, states may still have the power to regulate it. For now, sports betting dressed up as financial trading still looks like sports betting to the Federal Court in the Southern District of Ohio. For more information, please contact Robert Dove at rdove@keglerbrown.com or (614) 462-5443.
