Kalshi Loses Major Legal Battle as Appeals Court Says Ohio, Tennessee Can Regulate Prediction Markets Under Gambling Laws

On Friday, Kalshi suffered a major legal setback after a U.S. appeals court ruled that Ohio and Tennessee can regulate its sports-related event contracts under state gambling laws, deepening a split that could eventually reach the Supreme Court.

Appeals Court Sides With Ohio, Tennessee

The 6th U.S. Circuit Court of Appeals in Cincinnati unanimously rejected Kalshi’s argument that its sports contracts are financial "swaps" subject exclusively to federal oversight by the Commodity Futures Trading Commission or CFTC.

The court also found that federal commodities law does not prevent Ohio and Tennessee from enforcing their gambling regulations.

Judge Julia Smith Gibbons wrote that contracts tied to outcomes such as soccer corner kicks do not clearly serve the financial risk-management purposes associated with derivatives regulated under federal commodities law.

Kalshi Warns of Regulatory Patchwork

The ruling vacated a preliminary injunction previously issued against Tennessee and upheld a similar denial in Ohio, Reuters reported.

Kalshi said the decision highlights why nationwide federal regulation is needed.

"The ruling shows exactly why" a state-by-state approach does not work, spokesperson Dani Lever said, arguing that prediction markets cannot operate effectively when rules differ across state lines.

Kalshi did not immediately respond to Benzinga’s request for comment.

Prediction markets allow users to trade contracts tied to events ranging from sports and elections to weather and entertainment.

Prediction Markets Face Legal Split

The ruling adds to a growing divide among federal appeals courts.

Last month, the 9th Circuit ruled that Nevada could apply its gambling laws to Kalshi, while the 3rd Circuit previously reached the opposite conclusion in a case involving New Jersey.

New Jersey has asked the Supreme Court to review the 3rd Circuit ruling.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Kalshi and Benzinga have an existing data collaboration agreement.

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