Kalshi, a prediction market platform, has encountered a significant legal setback after the 6th US Circuit Court of Appeals ruled against it. The court sided with Ohio and Tennessee, asserting that these states can regulate sports-event contracts under their gambling laws.
The unanimous decision from the three-judge panel concluded that Kalshi did not sufficiently prove that its sports-event contracts qualify as “swaps” under the jurisdiction of the Commodity Futures Trading Commission (CFTC).
This ruling follows a similar decision from the 9th Circuit Court of Appeals, which diverged from an earlier ruling by the 3rd Circuit that had temporarily allowed Kalshi to operate in New Jersey while its legal battle continued.
The April ruling had indicated that Kalshi was likely to prevail in its argument that federal law preempts state regulations in New Jersey, setting the stage for a potential Supreme Court case.
Recently, a group of state lawmakers filed an amicus brief with the Supreme Court, urging it to address the jurisdictional dispute between Kalshi and state gaming authorities, which could clarify the regulatory landscape for prediction market companies.