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A federal appeals court has ruled that Tennessee and Ohio can enforce their gambling laws against Kalshi’s sports event contracts, handing the prediction market operator a setback in its fight with state regulators.
In a Sept. 25 decision reported Tuesday, the 6th U.S. Circuit Court of Appeals said Kalshi did not show that its sports event contracts are “swaps” regulated exclusively by the Commodity Futures Trading Commission. The court also said the Commodity Exchange Act does not preempt Tennessee or Ohio gambling laws.
The ruling vacated a preliminary injunction that had blocked Tennessee from enforcing its laws against Kalshi and upheld the denial of a similar injunction in Ohio.
6th Circuit rejects Kalshi’s preemption argument
According to the ruling, gambling regulation “lies at the heart of the state’s police power,” Judge Julia Smith Gibbons wrote for the three-judge panel.
The court also questioned whether contracts tied to outcomes such as soccer corner kicks or a 30-leg parlay further the Commodity Exchange Act’s goals. That undercut Kalshi’s argument that the contracts should fall under exclusive federal oversight.
Kalshi spokesperson Dani Lever criticized the decision, saying it shows why “a state-by-state patchwork doesn’t work” and arguing that markets need a single federal regulator with nationwide rules. The company said it does not expect the ruling to survive further legal review.
Tennessee Attorney General Jonathan Skrmetti called the outcome a “great win,” adding that sports wagering is heavily regulated and that the state had blocked an effort that would have removed safeguards for bettors.
Ruling adds to split among federal appeals courts
The 6th Circuit’s decision deepens an emerging split over how prediction markets should be treated under state gambling law.
Last month, the 9th Circuit said Kalshi’s event contracts are subject to Nevada gambling laws. But in April, the 3rd Circuit said Kalshi’s contracts were not subject to New Jersey gambling laws. New Jersey has already asked the U.S. Supreme Court to review that case.
For gambling regulators and industry watchers, the split matters because it leaves different rules in place across multiple states while higher courts weigh the issue. The latest ruling does not directly change New York law, but it adds to the broader debate over how states may police sports-related event contracts and other prediction market products.
What to watch next
The key question now is whether the Supreme Court steps in as federal appeals courts continue to disagree. Readers should also watch for Kalshi’s next legal move and for how other states respond as courts continue to sort out where federal commodities oversight ends and state gambling enforcement begins.
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Source: As reported by Jonathan Stempel.
