TLDR
- The 6th US Circuit Court of Appeals ruled that states can regulate Kalshi the same way they regulate gambling.
- The unanimous decision sided with Ohio and Tennessee in combined cases against the prediction market platform.
- The court found Kalshi did not prove its sports event contracts are swaps under federal oversight.
- The 3rd Circuit reached a different view in April, creating a split that could reach the Supreme Court.
- Twenty states are now in active lawsuits over whether they can regulate prediction markets.
A federal appeals court has ruled that states can regulate prediction market platforms like Kalshi the same way they regulate gambling. The decision is another loss for the company in its legal fight with state regulators.
The 6th US Circuit Court of Appeals issued the ruling on Friday. The case combined disputes from Ohio and Tennessee, and the panel ruled unanimously in favor of both states.
The court found that Kalshi did not prove its sports event contracts count as swaps. Swaps fall under the oversight of the Commodity Futures Trading Commission, the federal agency known as the CFTC.
Court Rejects Kalshi’s Federal Law Argument
Circuit Judge Julia Smith Gibbons wrote the opinion for the panel. She stated that even if the contracts were swaps, the Commodity Exchange Act would still not override state gambling laws.
Kalshi had argued that federal law blocked states from treating its platform as gambling. The 6th Circuit did not accept that position.
The ruling allows Ohio and Tennessee to keep asserting authority over prediction market activity within their borders.
The decision follows a similar ruling from the 9th US Circuit Court of Appeals last month. That court also supported the ability of states to regulate these platforms.
Appeals Courts Split on Prediction Markets
Not all courts have agreed. In April, the 3rd US Circuit Court of Appeals allowed Kalshi to keep operating in New Jersey while it appealed.
The 3rd Circuit found that Kalshi was likely to succeed in its claim that federal law takes priority over New Jersey’s rules. That view differs from the recent rulings in the 6th and 9th Circuits.
The split among appeals courts could send the issue to the US Supreme Court. Earlier this month, New Jersey asked the justices to decide how prediction markets should be regulated.
The Supreme Court receives thousands of petitions each year. It often takes cases involving major legal questions where appeals courts have reached different conclusions.
At the center of the dispute is one question. Are prediction markets regulated only at the federal level, or can states treat them as gambling under their own laws?
A bipartisan group of states has continued to challenge Kalshi and similar companies. These states want to keep their authority over the services.
President Trump has supported the growth of prediction markets. He has also backed the CFTC having exclusive control over the platforms.
In July, 44 states signed a letter to the CFTC. The states argued that the agency does not have the authority to regulate contracts tied to sports events.
There are currently 20 states involved in active lawsuits over whether they can regulate prediction markets.
Kalshi did not immediately respond to a request for comment after the 6th Circuit’s ruling. The question of who holds regulatory power over prediction markets remains unresolved.
