Sixth Circuit Rules Ohio and Tennessee May Regulate Kalshi Event Contracts Under State Gambling Laws
The 6th Circuit ruled Ohio and Tennessee can regulate Kalshi event contracts as gambling because they are not CFTC swaps. The Commodity Exchange Act does not preempt state laws, per Judge Gibbons. Kalshi expects reversal, pointing to conflicting circuit decisions in Nevada, New Jersey, and Iowa.
SCCG Take — The decision entrenches regulatory fragmentation across states, complicating national operations for prediction market firms and increasing legal costs until CFTC jurisdiction is clarified.
The 6th US Circuit Court of Appeals in Cincinnati ruled that Ohio and Tennessee can apply their local gambling laws to Kalshi event contracts. The decision is the latest setback for the prediction market operator, which maintains its products function as financial instruments rather than gambling offerings.
Circuit Judge Julia Smith Gibbons held that Kalshi could not establish its sports products as swaps under the exclusive domain of the Commodity Futures Trading Commission. Gibbons stated that swaps cover financial measures, indices, and instruments that help manage risk, not gaming-related contracts.
She determined the Commodity Exchange Act does not preempt state gambling laws. The statute exists to protect U.S. interests by improving risk management and pricing information, objectives that sports event contracts do not advance.
Kalshi Response and Conflicting Rulings Across Circuits
Kalshi does not expect the ruling to survive. A spokesperson said further legal review should overturn the decision. The spokesperson added that a state-by-state approach to regulation does not work for financial markets, which is why all similar products must remain under the CFTC purview.
Tennessee Attorney General Jonathan Skrmetti called the court ruling a great win for the state. Ohio’s attorney general has yet to release a statement.
The ruling joins other clashes. The 9th Circuit Court in San Francisco held that Nevada can apply its gambling laws to prediction markets. This contradicts an earlier Philadelphia ruling that New Jersey cannot regulate such markets, a decision New Jersey now seeks to overturn. US District Judge Stephen Locher also denied Kalshi’s preliminary injunction request against Iowa applying its gambling laws.
As first reported by GamblingNews, the battle for the future of prediction markets continues.
Reporting: GamblingNews
Generated by SCCG’s automated editorial system from published source reporting. SCCG Management holds editorial responsibility.
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