Sixth Circuit Questions Swap Classification as Kalshi Faces Dual Legal Battles
The Sixth Circuit expressed doubt about labeling prediction-market contracts as swaps, while a special-forces soldier seeks to dismiss insider-trading charges tied to similar contracts.
On July 30, the Sixth Circuit heard consolidated appeals from Ohio and Tennessee challenging Kalshi's prediction-market contracts, with judges questioning whether such contracts qualify as swaps under the Commodity Exchange Act and whether federal jurisdiction precludes state regulation. The panel highlighted concerns about the implications of treating sports bets as swaps, including potential federal felony exposure for bettors.
Earlier district decisions were split, one granting Kalshi a preliminary injunction on preemption grounds and another denying it. The following day, former special-forces soldier Gannon Van Dyke moved to dismiss a five-count indictment accusing him of insider trading on Polymarket, claiming the contracts are not swaps and that the government's theory is unprecedented. His defense cites narrow statutory readings and prior district rulings that rejected broad swap definitions for event contracts. Both cases underscore the unresolved legal status of prediction markets and could prompt a Supreme Court review.
Why it matters
The disputes could reshape how prediction markets are regulated and whether they fall under federal swap laws.
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