The US Court of Appeals for the Sixth Circuit on September 25 issued a ruling unfavorable to prediction-market operator KalshiEX LLC in its lawsuits with the states of Ohio and Tennessee. Kalshi had sought to halt enforcement, arguing that state gambling laws do not apply to sports prediction markets. According to the ruling, the appeals court allowed Ohio's enforcement while overturning a district court decision that had blocked enforcement in Tennessee, siding with the states in both cases, which had reached divergent conclusions. The appeals court did not recognize sports-related contracts as "swaps," which are financial instruments under federal law, and held that even if they were swaps, the CFTC's authority is limited to authorizing exchanges and supervising market operations. Judicial rulings on prediction markets have been split, with the Third Circuit Court of Appeals siding with Kalshi while the Ninth Circuit Court of Appeals ruled in favor of the states. This ruling becomes an important precedent recognizing state regulatory authority within the Sixth Circuit, but the underlying litigation itself is not over; the Tennessee case has been remanded to the district court, and proceedings will continue.
Sixth Circuit ruled state gambling laws apply to Kalshi's sports prediction markets, allowing Ohio and Tennessee enforcement against it.
