US Sixth Circuit Says States May Regulate Kalshi as Gambling

The US Court of Appeals for the Sixth Circuit ruled that state governments may regulate prediction-market platform Kalshi under gambling laws when it offers contracts tied to sporting events.

The Hill reported on September 25 that the Sixth Circuit sided with Ohio and Tennessee, finding that Kalshi failed to prove its sports-event contracts are swaps subject to the exclusive jurisdiction of the Commodity Futures Trading Commission.

Writing for the court, Judge Julia Smith Gibbons said that even if the contracts qualify as swaps, the federal Commodity Exchange Act does not preempt or invalidate states' authority to regulate gambling. The ruling, which consolidated separate cases brought by Ohio and Tennessee, is in line with a decision issued by the Ninth Circuit last month.

The decision further exposes a sharp split among US federal appeals courts. In April, the Third Circuit ruled that federal law was likely to take precedence over New Jersey's gambling regulations and allowed Kalshi to operate in the state. With appellate courts now split in opposite directions, the dispute is likely to be settled by the US Supreme Court. New Jersey and other states already filed a petition for certiorari earlier in September, asking the court to decide who has authority to regulate prediction markets.

Twenty states across the US are currently engaged in legal battles over whether state governments can exercise regulatory authority over prediction markets. In July, a coalition of 44 states sent a letter to the CFTC, strongly arguing that the agency has no authority to regulate sports-linked event contracts.

President Donald Trump, by contrast, supports the growth of the prediction-market industry and holds that the CFTC, rather than state governments, should have sole supervisory authority.