A growing legal dispute over the regulation of prediction markets has taken another turn after the 6th US Circuit Court of Appeals sided with Ohio and Tennessee in a case involving Kalshi.
Rather than allowing Kalshi’s sports-event contracts to operate under federal oversight alone, the court determined that the company had not sufficiently shown that its contracts qualify as “swaps” regulated by the Commodity Futures Trading Commission (CFTC). As a result, Ohio and Tennessee may apply their own state gambling laws to these contracts.
The unanimous decision by the three-judge panel, issued Friday, adds to an increasingly divided legal landscape surrounding prediction markets. The 9th Circuit reached a similar conclusion last month, while the 3rd Circuit took a different position in April by allowing Kalshi to continue operating in New Jersey while its appeal moves forward.
The conflicting rulings have raised a broader legal question: whether prediction-market activities should primarily fall under federal financial regulation or state-level gambling laws. The 3rd Circuit previously indicated that Kalshi had a strong chance of succeeding in its argument that federal law overrides New Jersey’s regulations.
The dispute could ultimately reach the US Supreme Court. On Wednesday, a group of state lawmakers filed an amicus brief asking the Supreme Court to consider the conflict between Kalshi and state gaming authorities. A ruling by the nation’s highest court could help clarify whether state regulators or federal agencies have primary authority over prediction-market companies.
