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State of Play’s TL;DR
- A federal appeals court ruled Ohio and Tennessee can apply gambling laws to Kalshi’s event contracts.
- The ruling deepens the legal battle between state sports betting regulators and prediction market.
A federal appeals court has ruled that Ohio and Tennessee can apply their gambling laws to Kalshi’s event contracts. The decision is another setback for the prediction market operator and adds to a growing legal split over whether states or the Commodity Futures Trading Commission (CFTC) have the final say.
A three-judge panel of the 6th U.S. Circuit Court of Appeals in Cincinnati said the federal Commodity Exchange Act does not override gambling laws in either state.
Sixth Circuit rejects Kalshi’s federal pre-emption argument
Kalshi had argued that its sports-event contracts are swaps regulated exclusively by the CFTC, which would block Ohio and Tennessee from treating them as gambling products.
The appeals court rejected that position.
Writing for the panel, Circuit Judge Julia Smith Gibbons said swaps generally refer to financial instruments used to hedge risk, not gaming-related contracts. She also wrote that regulating gambling is a core part of a state’s police power.
The ruling overturned a preliminary injunction that had blocked Tennessee from enforcing its gambling laws against Kalshi. It also upheld a lower court decision denying Kalshi a similar injunction in Ohio.
Tennessee Attorney General Jonathan Skrmetti called the decision a “great win” for the state. Kalshi, meanwhile, said it expects the ruling to be overturned.
Why the ruling matters beyond Ohio and Tennessee
The decision deepens an existing split among federal appeals courts over how prediction markets should be regulated. That split is one reason the case could draw even more attention across the gambling and event-contract space.
The court’s reasoning also cut directly to the nature of the products at issue. Gibbons questioned whether betting on outcomes such as the number of corner kicks in a soccer match or a long-shot parlay advances the federal law’s purpose of helping people manage financial risk.
Similar cases are pending in Connecticut, New York, Arizona, Minnesota, and other states, leaving the broader regulatory picture unsettled.
What comes next
Kalshi has said it expects the ruling to be overturned, but the immediate result is that Ohio and Tennessee can apply their gambling laws to the company’s event contracts.
The bigger question is whether the widening split among courts will eventually force a higher-level answer on who regulates these markets: state gambling authorities or the CFTC.
Based on reporting by Chance Townsend for Yahoo Finance.
