Kalshi has suffered another legal setback in the US as a federal appeals court backed Ohio and Tennessee in their efforts to regulate sports-related prediction contracts under state gambling laws.
The 6th US Circuit Court of Appeals unanimously ruled that Kalshi had not demonstrated that its sports-event contracts qualify as “swaps” under the jurisdiction of the Commodity Futures Trading Commission (CFTC). The decision could make it more difficult for the prediction market to argue that its activities should be governed exclusively by federal regulations.
The ruling adds another layer of uncertainty to the regulatory future of prediction markets in the US. Last month, the 9th Circuit reached a similar conclusion, while the 3rd Circuit took a different approach in April, allowing Kalshi to continue operating in New Jersey while its legal challenge moves forward.
The conflicting decisions highlight a larger battle over who should have authority over prediction markets: state gambling regulators or federal financial regulators. Kalshi has argued that federal law takes precedence over state restrictions, an argument that received support from the 3rd Circuit in its earlier ruling.
With different federal appeals courts taking opposing positions, the dispute could eventually reach the US Supreme Court. The stakes extend beyond Kalshi, as a Supreme Court ruling could establish a clearer regulatory framework for prediction markets and determine how states and federal agencies can oversee the rapidly expanding sector.
Meanwhile, a group of state lawmakers has already asked the Supreme Court to intervene. In an amicus brief filed Wednesday, they urged the court to resolve the jurisdictional dispute between Kalshi and state gaming authorities.
