A federal appeals court delivered a significant setback to prediction-market operator Kalshi late Friday, creating fresh regulatory consequences that carried into Saturday’s scan.
The U.S. Court of Appeals for the Sixth Circuit unanimously ruled that Kalshi had not established that its sports-event contracts qualify as swaps falling within the Commodity Futures Trading Commission’s exclusive jurisdiction. The Block, Kalshi loses Ohio and Tennessee appeal
The ruling allows Ohio and Tennessee to apply their state gambling laws to Kalshi’s sports contracts.
Kalshi had argued that because it operates as a federally regulated derivatives exchange, state gambling regulators were preempted by the Commodity Exchange Act.
The Sixth Circuit rejected that position.
The panel also ruled that even if the contracts qualified as swaps, federal commodities law would not necessarily prevent the states from enforcing their gambling statutes. Covers.com
The decision deepens an existing appellate split over prediction markets. Courts in different jurisdictions have reached conflicting conclusions about the boundary between federally regulated event contracts and state-regulated gambling.
That increases the possibility that the legal question eventually requires resolution at a higher level.
TOKEN RECON ASSESSMENT
Prediction markets are discovering the limit of federal registration as a regulatory shield.
The immediate issue is sports contracts, but the legal principle is broader: operating under CFTC oversight may not automatically displace state law when a product closely resembles activity states traditionally regulate.
The circuit split is now more important than any single state dispute. If contradictory appellate decisions persist, Supreme Court review becomes increasingly plausible.
Sources
The Block, Kalshi loses appeal over Ohio and Tennessee sports betting laws
