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UKAppeals Court Says Ohio and Tennessee Can Regulate Kalshi Sports Prediction Markets
Key Highlights
- The 6th U.S. Circuit Court of Appeals said Ohio and Tennessee can regulate Kalshi’s sports event contracts.
- The unanimous ruling rejected Kalshi’s claim that federal regulation blocks state gambling laws.
- Different appeals courts have reached different conclusions, raising the possibility of Supreme Court review.
Ohio and Tennessee now have authority to regulate sports betting on prediction markets after a landmark ruling by the 6th U.S. Circuit Court of Appeals. However, the case may be headed for the Supreme Court.
Appeals Court Backs State Oversight
On Sept. 25, a three-judge panel in the 6th U.S. Circuit Court of Appeals ruled in favor of Ohio and Tennessee, agreeing that the states can apply their gambling laws to sports-related event contracts offered by Kalshi. The unanimous decision gives the states authority to regulate those markets even though Kalshi operates as a federally regulated prediction market.
The ruling follows a similar outcome in the 9th U.S. Circuit Court of Appeals, which in August sided with Nevada after a contentious regulatory settlement with Kalshi. The complex matter has drawn different legal conclusions among the courts, however. In April, the 3rd U.S. Circuit Court of Appeals ruled in favor of the Commodity Futures Trading Commission (CFTC) in a case involving New Jersey, claiming the regulator had exclusive rights over all contract swaps regardless of the contract type.
Kalshi has argued that its event contracts are financial products known as swaps, which fall under the authority of the CFTC. States have taken a different view, arguing that sports event contracts work like sports wagers and should follow state gambling laws. That disagreement has led to lawsuits between prediction platforms, state regulators, and federal authorities.
In the most recent case, the appeals court found that Kalshi had not shown that its sports contracts meet the legal definition of swaps covered by the CFTC’s exclusive authority. The judges also said state laws would not automatically be blocked even if the contracts qualified as swaps. The ruling reversed a Tennessee federal court decision while supporting a separate Ohio ruling favoring state regulation.
Kalshi Disagrees With State-by-State Rules
Tennessee Attorney General Jonathan Skrmetti welcomed the decision, saying Kalshi had tried to avoid the rules and taxes tied to sports gambling in the state. He also argued that sports wagering needs safeguards because of the risks it can create for consumers. Ohio officials had also defended the state’s authority during the legal fight.
Kalshi spokesperson Dani Lever said the company disagreed with the decision and pointed to conflicting court rulings across the country. She argued that different rules in each state make it difficult for prediction markets to operate under one consistent system.
“Courts can’t agree on the basics: Some say federal law covers these contracts, and others say it doesn’t. Some recognize that sports have real economic impact, while others (incorrectly) claim they don’t,” Lever explained. “Markets can’t operate when the rules change at every state line, which is why Congress created a single federal regulator with nationwide rules.”
The CFTC has also defended federal authority over event contracts and has sued nine states as part of that effort. However, the 6th Circuit rejected the idea that federal law prevents Ohio and Tennessee from enforcing their gambling rules. That decision aligns with the 9th Circuit Court of Appeals’ rejection of sports event contracts as “swaps.”
Supreme Court Question Moves Closer
The ruling is the second recent appeals court decision supporting state regulation of sports prediction markets. Along with the 9th U.S. Circuit Court of Appeals ruling in Nevada, states now have greater legal support for enforcing their gambling laws against prediction platforms. The 3rd U.S. Circuit Court of Appeals ruling in favor of the CFTC against New Jersey in April adds to the complexity of the issue, however.
New Jersey has asked the U.S. Supreme Court to review its case, but it isn’t clear whether the justices will take it. The court could consider the dispute soon or wait for additional appeals courts to rule on similar cases. Until then, Kalshi and other prediction market companies face an uncertain legal landscape as states continue testing their regulatory power.
