Key facts
- A federal appeals court ruled states can enforce gambling laws against prediction market Kalshi.
- The Sixth Circuit found Kalshi's sports-event contracts are not "swaps" under the Commodity Exchange Act.
- The court also ruled that federal law does not preempt state gambling laws on prediction markets.
- Kalshi had sued Ohio and Tennessee after regulators indicated enforcement actions.
- The ruling creates a circuit split, with the Third Circuit previously ruling in favor of Kalshi and the Ninth Circuit against it.
- New Jersey has asked the Supreme Court to settle the matter nationally.
Another federal appeals court has ruled that states can enforce their gambling laws against the prediction market Kalshi, which asserts that it can only be regulated by the US government. On Friday, a three-judge panel in the US Court of Appeals for the Sixth Circuit ruled unanimously against Kalshi and in favor of Ohio and Tennessee.
The judges found that while the US Commodity Futures Trading Commission has exclusive jurisdiction over “swaps,” sports wagers offered on Kalshi do not meet the legal definition of a swap. The ruling, written by Judge Julia Smith Gibbons, stated that Kalshi had not shown its sports-event contracts satisfy the statutory definition of a ‘swap’ to fall within the CFTC’s exclusive jurisdiction. Furthermore, the court held that even if Kalshi’s contracts were considered swaps, the Commodity Exchange Act neither expressly nor impliedly preempts Ohio’s or Tennessee’s gambling laws.
Kalshi had sued Ohio and Tennessee after gambling regulators in each state indicated they would bring enforcement actions against the prediction market. The Sixth Circuit ruling upheld a previous Ohio district court decision against Kalshi and vacated a Tennessee district court order that had favored Kalshi. Many states are attempting to halt or restrict gambling on Kalshi, which offers sports bets across the US without state gambling licenses or taxes, and in some states where sports gambling is illegal or restricted.
The Sixth Circuit decision adds to a circuit split on the issue, with Kalshi having previously won a case in the Third Circuit involving New Jersey and lost one in the Ninth Circuit involving Nevada. State governments now hold two major victories to Kalshi's one, with a Fourth Circuit case involving Maryland still pending. New Jersey has requested the Supreme Court to resolve the matter nationwide.