Is Kalshi legal in Tennessee? The case that could split the circuits
Tennessee is the state where Kalshi is available and unwelcome at the same time. The state told the exchange to stop in January 2026. Kalshi sued, won, and has been trading Tennessee sports contracts under a federal court order ever since. On July 30, 2026 the Sixth Circuit heard Tennessee's appeal. It has not ruled, and the ruling matters far beyond Tennessee.
The timeline
| Date | What happened |
|---|---|
| Nov 2020 | Tennessee launches online-only sports betting. It is the only state that taxes handle rather than revenue, later set at 1.85%. |
| Jan 10, 2026 | The Tennessee Sports Wagering Council issues cease-and-desist orders to Kalshi, Polymarket and Crypto.com over sports event contracts, with customer funds to be returned by Jan 31. |
| Jan 12, 2026 | Kalshi sues the Council and the Attorney General in the Middle District of Tennessee, arguing the Commodity Exchange Act preempts state gaming law. |
| Jan 13, 2026 | Judge Aleta Trauger issues a temporary restraining order. Enforcement stops before it starts. |
| Feb 19, 2026 | The court grants Kalshi a preliminary injunction, finding the contracts likely qualify as swaps and that conflict preemption likely applies. The Council is dismissed from the case. |
| Mar 9, 2026 | The Southern District of Ohio rules the opposite way on the same question. Two district courts in the same circuit now disagree. |
| May 2026 | A tribal coalition files an amicus brief backing Tennessee. AG Jonathan Skrmetti publicly defends the state's authority to regulate sports wagering. |
| Jul 30, 2026 | One Sixth Circuit panel — Judges Clay, Gibbons and Bloomekatz — hears the Tennessee and Ohio appeals back to back in Cincinnati. Judges press Kalshi hard on whether the contracts are swaps at all. |
| Aug 14, 2026 | No decision. The docket records the consolidated cases as argued, not decided. |
Why Tennessee moved first and hardest
Tennessee had an unusual amount to lose. Because the state taxes handle rather than gross gaming revenue, its receipts do not shrink when sportsbooks have a bad month — they shrink when volume leaves the licensed market. Every dollar wagered on an unlicensed venue is a dollar that never touches the 1.85% privilege tax. In June 2026 licensed operators pushed roughly $456m of handle through the system and paid about $8.4m in privilege tax on it. Kalshi's Tennessee volume is taxed at zero.
That is a structurally different grievance from the one most states have. Nevada and Michigan objected to unlicensed operation. Tennessee objects to unlicensed operation and to a tax base that leaks by design.
What the Sixth Circuit is actually deciding
The framing that dominated coverage in January — states versus federal regulators — is not quite the question in front of this panel. The panel started one step earlier. Before you reach preemption, you have to decide whether a contract on the outcome of a football game is a swap within the meaning of the Commodity Exchange Act. Kalshi's entire position depends on yes. If the answer is no, the CFTC's exclusive jurisdiction never attaches, and state gaming law applies the way it always did.
The Tennessee district court said yes. The Ohio district court said no. The Sixth Circuit will answer for both, and whichever way it goes, one of those two rulings gets erased. Reporters who sat through the argument described the panel as visibly sceptical of Kalshi's reading. That is an impression, not a holding, and appellate impressions are wrong often enough to be worth discounting.
Where Tennessee sits in the national picture
| Jurisdiction | Move | Result |
|---|---|---|
| Third Circuit (New Jersey) | Ruled sports event contracts are swaps; CEA preemption applies | Kalshi win, April 7, 2026 |
| Sixth Circuit (Tennessee + Ohio) | Consolidated appeals from opposite district rulings | Argued July 30, 2026; undecided |
| Fourth Circuit (Maryland) | Heard Kalshi's preemption appeal May 7, 2026 | Decision pending |
| Nevada / Michigan / Washington | Enforcement actions | Some or all Kalshi markets shut down |
| Minnesota | Full statutory ban | Blocked before taking effect, July 2026 |
| New York | $36bn suit filed July 31, 2026 | CFTC issued an emergency order Aug 11 directing Kalshi to keep operating |
| Tennessee | Cease-and-desist, then defended on appeal | Kalshi live under injunction, pending Sixth Circuit |
What this means if you are in Tennessee
Kalshi's sports markets are reachable from Tennessee today. That access rests on a preliminary injunction, which is by definition provisional. If the Sixth Circuit reverses, the injunction dissolves and the January 2026 cease-and-desist order becomes enforceable again, including the instruction to return customer funds. Anyone holding open positions in long-dated Tennessee-accessible markets is carrying that as an unpriced risk. Licensed Tennessee sportsbooks are unaffected either way; they are regulated under a separate statute. If you want the mechanical differences between the two products, we cover them in sportsbook versus prediction market.
What would change it
Three things, in rough order of likelihood. A Sixth Circuit opinion, which could land any week and would immediately reshape both Tennessee and Ohio. A Supreme Court cert grant, which becomes far more plausible the moment the Sixth Circuit disagrees with the Third. Or federal legislation defining sports event contracts explicitly, which Congress has discussed and not delivered. We track every state's status on the Kalshi legality tracker.
Frequently asked questions
- Is Kalshi legal in Tennessee?
- Kalshi is accessible in Tennessee, but not because the state permitted it. Tennessee ordered Kalshi to stop in January 2026. A federal judge blocked that order, and the injunction is what keeps Kalshi live while the Sixth Circuit decides the appeal.
- Did Tennessee try to shut Kalshi down?
- Yes. On January 10, 2026 the Tennessee Sports Wagering Council issued cease-and-desist orders to Kalshi, Polymarket and Crypto.com over sports event contracts, and directed them to return customer funds by January 31, 2026.
- What is the Sixth Circuit Kalshi case about?
- The Sixth Circuit is hearing Tennessee's and Ohio's appeals together. The threshold question is whether sports event contracts are swaps under the Commodity Exchange Act. If they are not, the federal preemption argument that has protected Kalshi in several states collapses.
- Does Kalshi pay Tennessee sports betting tax?
- No. Tennessee taxes licensed sportsbooks at 1.85% of handle rather than of revenue. Kalshi holds no Tennessee licence and pays none of that tax, while licensed operators paid roughly $8.4m on $456m of handle in June 2026 alone.
- Is Polymarket legal in Tennessee?
- Polymarket received the same January 2026 cease-and-desist order as Kalshi. It did not obtain the same injunction Kalshi did, so its position in Tennessee is weaker and different from Kalshi's.
- What happens if the Sixth Circuit rules against Kalshi?
- A ruling for Tennessee would create a direct conflict with the Third Circuit's April 2026 decision for Kalshi. A circuit split of that kind is the classic route to Supreme Court review, and it would give every state regulator a published federal opinion to cite.
Sources
- CoinDesk: Tennessee orders Kalshi, Polymarket and Crypto.com to cease sports betting contracts
- SBC Americas: Kalshi sues Tennessee after being told to shut down sports contracts
- CoinDesk: Federal judge temporarily halts Tennessee's bid to shut down Kalshi
- Tennessee Attorney General: Skrmetti fights to protect Tennessee's authority to regulate sports wagering
- SBC Americas: Kalshi attorneys grilled in Sixth Circuit oral arguments
- InGame: Sixth Circuit judge to Kalshi — what's so bad about being regulated by states?
- CourtListener: KalshiEX LLC v. Schuler, No. 26-3196 docket
- CBS Sports: Status of Kalshi and Polymarket in all 50 states