Key facts
- A US appeals court ruled against prediction markets operator Kalshi.
- The court stated states can regulate Kalshi's event contracts under their gambling laws.
- Kalshi did not show its sports event contracts are federal "swaps" regulated by the CFTC.
- Federal law does not preempt Ohio's or Tennessee's gambling laws.
A US appeals court ruled on Friday against prediction markets operator Kalshi, determining that states have the authority to regulate its "event contracts" under their respective gambling laws. The 6th US Circuit Court of Appeals stated that Kalshi failed to prove its sports event contracts qualify as "swaps" subject to exclusive regulation by the federal Commodity Futures Trading Commission (CFTC). The court also concluded that federal law does not preempt the gambling laws of Ohio or Tennessee, allowing these states to regulate such contracts. The ruling follows similar decisions from other circuit courts, creating a split that could lead to a Supreme Court case. A group of state lawmakers has filed an amicus brief urging the Supreme Court to weigh in on the matter.
The ruling represents a setback for Kalshi, which had argued for federal oversight of its prediction markets.