Another appeals court rules against prediction market provider Kalshi, says sports contracts are subject to state regulations
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Summary
The Sixth Circuit Court of Appeals ruled that Kalshi's sports-related event contracts are not swaps under federal law and thus fall under state gaming regulations. This decision follows earlier rulings by other circuits and highlights ongoing legal disputes over whether prediction markets should be regulated by the Commodity Futures Trading Commission (CFTC) or by individual states. Kalshi had sought injunctions to prevent state lawsuits in Ohio and Tennessee, with mixed outcomes at the federal court level.
Why it matters
The ruling matters because it reinforces the authority of states to regulate sports-related betting markets like Kalshi's, which could impact how these platforms operate and are taxed. It also deepens the existing circuit split on the issue, increasing the likelihood that the U.S. Supreme Court will address this regulatory conflict. The case touches on broader regulatory and competitive issues between federally regulated prediction markets and state-licensed gambling operators.
Key context
Prediction markets offering sports contracts have grown since the 2024 election, prompting states to claim regulatory authority due to concerns about competition with state gambling platforms and tax revenue loss. States are also concerned that these platforms allow users aged 18 and over to participate, whereas most states restrict traditional gambling to 21 and older. Previous appellate courts have issued conflicting rulings, with some affirming CFTC jurisdiction and others siding with state authority.
Key numbers and entities
The main entities involved are Kalshi, a prediction market provider led by CEO Tarek Mansour, the Sixth Circuit Court of Appeals, state regulators in Ohio and Tennessee, and the Commodity Futures Trading Commission (CFTC). The ruling references cases involving states Ohio and Tennessee, and mentions prior contrasting rulings from the Third and Eighth Circuit Courts of Appeals. Specific financial figures are not provided.
What remains unclear
The source does not specify the immediate operational consequences for Kalshi following the decision, nor does it detail how the platform or others might adjust compliance or business practices. It also remains undetermined when or whether the Supreme Court will definitively rule on the circuit split. Additionally, no information is provided about the potential impact on users or the broader prediction market industry beyond legal jurisdiction.