Kalshi lost another round Friday in its fight over whether states can treat prediction markets as gambling. A three-judge panel of the 6th U.S. Circuit Court of Appeals in Cincinnati ruled that Ohio and Tennessee can apply their gambling laws to Kalshi’s event contracts, Reuters reported.
Kalshi’s central argument is that its sports contracts are “swaps,” financial products that fall under the CFTC’s exclusive oversight rather than state gambling rules. The court rejected that.
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 added that regulating gambling is a core part of a state’s police power, and that the federal Commodity Exchange Act does not override Ohio’s or Tennessee’s gambling laws, according to Reuters.
Gibbons also questioned how betting on the number of corner kicks in a soccer match, or on a long-shot parlay, serves the federal law’s goal of helping people manage financial risk.
The ruling overturned a preliminary injunction that had barred Tennessee from enforcing its gambling laws against Kalshi. It also upheld a lower court’s refusal to grant Kalshi a similar injunction in Ohio. Tennessee Attorney General Jonathan Skrmetti called the decision a “great win” for the state. Kalshi said it expects the ruling to be overturned.
The unanimous decision deepens a split among federal appeals courts over who gets to regulate the fast-growing industry: individual states or the federal Commodity Futures Trading Commission (CFTC). A split among appeals courts often makes Supreme Court review more likely, but there’s no guarantee.
SCOTUS receives thousands of petitions a year and agrees to hear very few. Similar cases are pending in Connecticut, New York, Arizona, Minnesota, and other states.