Kalshi's Court Streak Hits Two Losses, Three Tries to Tie 🎲

Prediction market Kalshi suffered a second appellate defeat on Friday when the 6th US Circuit Court of Appeals ruled unanimously that Ohio and Tennessee may regulate the company's sports-event contracts under state gambling laws. A three-judge panel found that Kalshi failed to demonstrate its sports contracts qualify as "swaps" under the jurisdiction of the Commodity Futures Trading Commission (CFTC).

The 6th Circuit decision follows a similar ruling last month from the 9th Circuit Court of Appeals, which also rejected Kalshi's argument that its products fall under federal oversight rather than state gaming authority. The two rulings break from an April decision by the 3rd Circuit Court of Appeals, which allowed Kalshi to continue operating in New Jersey while its appeal proceeds. The 3rd Circuit panel found Kalshi was likely to succeed in arguing that federal law preempts New Jersey's regulations.

The split among the three federal appellate courts has set the stage for a potential Supreme Court case. Cointelegraph reported on Wednesday that a group of state lawmakers filed an amicus brief with the Supreme Court, urging the justices to weigh in and resolve whether state gaming authorities or federal regulators such as the CFTC hold jurisdiction over prediction market companies.

The dispute centers on whether event contracts tied to sports outcomes constitute financial derivatives subject to CFTC oversight or wagers governed by state gambling statutes. Kalshi has argued its products are swaps and therefore fall under federal jurisdiction, while Ohio, Tennessee and other states have maintained they are betting instruments subject to local regulation.

The conflicting circuit rulings leave Kalshi's legal status uncertain across different regions of the United States as the company continues to push for nationwide clarity at the Supreme Court level.