Prediction market operator Kalshi has suffered another major US legal setback after a federal appeals court ruled that Ohio and Tennessee can apply state gambling laws to its sports event contracts.
The Sixth US Circuit Court of Appeals unanimously rejected Kalshi’s attempt to prevent the two states from taking enforcement action against its sports prediction markets.
The court vacated an injunction that had prevented Tennessee from enforcing its gambling laws against Kalshi and upheld an Ohio federal judge’s earlier refusal to grant similar protection.
Kalshi has argued that its event contracts are federally regulated derivatives under the Commodity Exchange Act and therefore fall under the exclusive jurisdiction of the Commodity Futures Trading Commission.
Circuit Judge Julia Smith Gibbons said Kalshi had failed to demonstrate that its sports contracts qualified as “swaps” subject exclusively to federal oversight. The court also found that federal commodities legislation did not pre-empt Ohio and Tennessee gambling laws.
The ruling creates a deepening split between US federal appeals courts over the regulatory status of prediction markets.
The Ninth Circuit ruled in August that Nevada could apply its gambling laws to Kalshi, while the Third Circuit reached the opposite conclusion in New Jersey earlier this year. New Jersey has since asked the US Supreme Court to review that decision.
Dani Lever, Kalshi spokesperson, said: “The ruling shows exactly why a state-by-state patchwork doesn’t work.”
Jonathan Skrmetti, Tennessee Attorney General welcomed the judgment, while the ruling leaves Kalshi exposed to enforcement measures in both Tennessee and Ohio.
The widening disagreement between federal circuits increases the prospect that the Supreme Court will ultimately be asked to determine whether sports prediction markets are federally regulated financial products or activities that states can regulate as gambling.
Tags: Kalshi,State Gambling Laws,Dani Lever,Jonathan Skrmetti
