Court Ruling Allows Ohio and Tennessee to Regulate Kalshi

Kalshi just took another big hit in its sports prediction markets.

The US Court of Appeals for the Sixth Circuit has sided with Ohio and Tennessee in their lawsuits over the controversial offering. The court upheld the lower courts' rulings, finding that Kalshi didn’t do enough to show its sports contracts fall under the Commodity Exchange Act (CEA). 

As a result, the states can enforce their sports betting laws on Kalshi’s controversial markets. The ruling also vacates an injunction Kalshi had previously secured against Tennessee.

Kalshi Loses Second Circuit Court Battle

The prediction market giant has been fighting hard to protect its sports prediction markets over the last two years. After mixed results in lower courts, Kalshi won a significant victory in the Third Circuit, which narrowly ruled that New Jersey lacked the authority to regulate or ban sports markets.

While the win brought hope for Kalshi’s fight, the Ninth Circuit's ruling in favor of the Nevada Gaming Control Board changed that. They were willing to assume that the CEA covers sports contracts, but did not believe the law preempts state gambling laws.

The Fourth Circuit is currently considering another case involving Kalshi’s sports markets, meaning another ruling could be coming soon.

The Ball Is In SCOTUS’s Court

After years of legal battles, the US Supreme Court (SCOTUS) will finally decide the future of sports prediction markets. 

New Jersey appealed their loss in the Third Circuit to the nation’s highest court on September 2. This came just days after the Ninth Circuit ruled against Kalshi, allowing the state to officially submit its case to SCOTUS. 

While more cases are working their way through the US legal system, they will likely be resolved by whatever ruling SCOTUS hands down.

There is no timetable for a ruling.

Two Key Arguments Against Kalshi

When the fight over Kalshi’s sports contracts first began, it centered on the offering’s designation as a “swap” under the CEA. This led to many early wins, especially with the Commodity Futures Trading Commission supporting the industry’s argument. While some courts refused to accept the designation, Kalshi’s chances at victory felt far higher.

That all changed over the last few months, when courts began accepting the “swaps” designation but still ruling against Kalshi. Those courts, including the Ninth Circuit, believe the CEA was never intended to preempt state gambling laws. As a result, it did not restrict states' right to regulate the industry. 

Now, Kalshi must convince SCOTUS on both arguments to keep its sports markets from being regulated by states.