Prediction market platform Kalshi has suffered a significant legal setback after a federal appeals court ruled that Ohio and Tennessee have the legal authority to regulate sports-event contracts under their respective state gambling laws. The decision marks another critical chapter in the ongoing battle between federal regulatory oversight and state-level gaming enforcement.
The 6th US Circuit Court of Appeals ruled against Kalshi on Friday, when a three-judge panel sided unanimously with the states of Ohio and Tennessee. According to the panel, the prediction market platform failed to adequately demonstrate that its sports-event contracts qualify as “swaps” that fall exclusively under the jurisdiction of the Commodity Futures Trading Commission (CFTC).
This recent ruling follows a similar finding from the 9th Circuit Court of Appeals last month. However, these decisions stand in notable contrast to an earlier ruling in April by the 3rd Circuit Court of Appeals, which had allowed the company to continue doing business in New Jersey while its broader legal appeal process proceeds.
The April ruling had concluded that Kalshi was likely to succeed with its core legal argument—namely, that federal law preempts New Jersey’s state-level gambling regulations. This sharp division among different federal circuits has created a patchwork of conflicting legal standards across the country, setting the stage for what many legal experts believe will inevitably become a landmark Supreme Court case.
Adding to the urgency of the legal conflict, a group of state lawmakers recently filed an amicus brief with the Supreme Court. The brief urges the nation’s highest court to weigh in on the brewing jurisdictional dispute between Kalshi and state gaming authorities. A definitive ruling from the Supreme Court could ultimately resolve the broader question of whether state-level gaming authorities or federal financial regulatory agencies hold ultimate jurisdiction over modern prediction market companies and their specialized event-based contracts.
As the legal landscape surrounding prediction markets continues to fracture across different federal jurisdictions, industry participants and state regulators alike are closely monitoring the next moves in a battle that could fundamentally reshape how financial and event-based contracts are supervised throughout the United States.
