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Kalshi has lost another federal appeals court battle over sports event contracts, deepening a split between US courts over whether states can apply gambling laws to prediction markets.
The Sixth Circuit ruled on September 25 that Ohio and Tennessee can enforce their gambling laws against Kalshi. The decision follows a similar August ruling from the Ninth Circuit, while the Third Circuit reached the opposite conclusion in a New Jersey case earlier this year.
Good to Know
- The Sixth Circuit ruled that Kalshi had not shown its sports contracts qualify as swaps under federal law.
- The court also found that state gambling laws would not automatically be preempted even if the contracts counted as swaps.
- New Jersey has already asked the US Supreme Court to review the wider prediction market dispute.
Federal Courts Split Over Kalshi Sports Contracts
The latest ruling adds another layer to a growing disagreement between federal appeals courts.
In April, the Third Circuit allowed Kalshi to keep offering sports event contracts in New Jersey while litigation continues. The divided panel concluded that Kalshi had shown a likelihood that its contracts qualify as swaps and that federal commodities law preempts state gambling rules.
The Ninth Circuit went the other way on August 28. It ruled that Nevada could enforce its gaming laws against Kalshi and rejected the argument that the Commodity Exchange Act displaced state authority over the sports products at issue.
Ohio and Tennessee have now secured a similar result.
Circuit Judge Julia Smith Gibbons wrote:
“We hold that Kalshi has not shown that its sports-event contracts satisfy the statutory definition of a ‘swap’ so as to fall within the scope of the CFTC’s ‘exclusive jurisdiction.’”
The Sixth Circuit also ruled that the Commodity Exchange Act does not expressly or implicitly block Ohio or Tennessee gambling laws, even under the assumption that the contracts qualify as swaps.
Tennessee Injunction Falls After Appeal
The ruling resolves two cases that had produced different results at the district court level.
An Ohio federal judge previously refused to stop state regulators from enforcing gambling laws against Kalshi. A Tennessee court had granted Kalshi a preliminary injunction, temporarily preventing similar enforcement.
The Sixth Circuit affirmed the Ohio result and vacated the Tennessee injunction. Both cases will now return to the lower courts.
Kalshi maintains that its contracts are federally regulated financial products rather than conventional sports bets. The company operates as a Commodity Futures Trading Commission registered designated contract market and argues that federal oversight gives the CFTC exclusive authority over its event contracts.
Ohio and Tennessee argue that the sports products function as wagering and require state sports betting licences.
Products such as Kalshi sports combinations have also narrowed the practical gap between prediction markets and sportsbooks by allowing customers to combine multiple outcomes in one position.
Supreme Court Review Gets Closer
The conflicting appellate decisions increase the importance of the New Jersey case already sitting before the Supreme Court.
New Jersey filed its petition for a writ of certiorari on September 2. The Supreme Court docket lists an October 8 deadline for a response.
New Jersey Attorney General Jennifer Davenport said:
“We’re calling on the Supreme Court to resolve this issue and recognize that Congress did not silently make the sports-betting industry immune from state law.”
Other prediction market litigation remains active around the country, meaning the legal question could continue producing different results until the Supreme Court or Congress provides a broader answer.
The post Kalshi Loses Sixth Circuit Appeal In Ohio And Tennessee Cases appeared first on iGaming.org.