Appeals Court Rules States Can Regulate Kalshi Prediction Markets

A U.S. appeals court has ruled that Tennessee and Ohio can regulate event contracts offered by prediction market operator Kalshi under their respective gambling laws. This decision deepens a circuit split regarding regulatory authority over the rapidly expanding prediction market industry.

What Happened

The 6th U.S. Circuit Court of Appeals in Cincinnati issued a ruling on September 25, determining that both Tennessee and Ohio have the authority to regulate prediction market operator Kalshi’s event contracts under their state gambling laws (Knoxville News-Sentinel). This decision vacates a preliminary injunction previously issued by a Tennessee federal judge against the enforcement of that state’s gambling laws and upholds the denial of a similar injunction against Ohio by a federal judge in that state.

Circuit Judge Julia Smith Gibbons, writing for a unanimous three-judge panel, concluded that Kalshi failed to demonstrate that its sports event contracts qualify as “swaps” that would fall under the exclusive regulatory purview of the federal Commodity Futures Trading Commission (CFTC). The court also found that the federal Commodity Exchange Act does not preempt Tennessee or Ohio’s existing gambling laws. This ruling contributes to a growing divergence among federal appeals courts concerning the regulatory oversight of this industry, potentially setting the stage for a review by the U.S. Supreme Court.

Key Details

• The 6th U.S. Circuit Court of Appeals ruled that prediction market contracts, specifically those related to sports events, are not necessarily “swaps” subject to exclusive federal CFTC regulation (Knoxville News-Sentinel).
• Circuit Judge Julia Smith Gibbons stated that gambling regulation is a core aspect of state police power, affirming that Congress has granted states primary responsibility for determining permissible forms of gambling within their borders (Knoxville News-Sentinel).
• Tennessee Attorney General Jonathan Skrmetti characterized the decision as a “great win” for the state, emphasizing the importance of regulating sports wagering due to potential harms and expressing satisfaction in thwarting Kalshi’s attempts to bypass safeguards (Knoxville News-Sentinel).

Why It Matters

This ruling from the 6th Circuit intensifies a regulatory conflict regarding prediction markets, which enable wagers on various outcomes including sports, elections, and cultural events. The decision puts Tennessee and Ohio, both Republican-controlled states, in alignment with other states seeking to regulate these platforms, placing them at odds with the previous administration of Republican President Donald Trump and the CFTC (Knoxville News-Sentinel).

The divergence among federal appeals courts creates regulatory uncertainty for prediction market operators. The 9th Circuit in San Francisco recently determined that Kalshi’s event contracts are subject to Nevada’s gambling laws, while the 3rd Circuit in Philadelphia ruled in April that Kalshi’s contracts are not subject to New Jersey’s gambling laws. New Jersey has since petitioned the Supreme Court to overturn the 3rd Circuit’s decision (Knoxville News-Sentinel). Kalshi, through spokesperson Dani Lever, indicated it does not expect the decision to withstand further legal review, arguing that a state-by-state regulatory framework hinders market operations and that a single federal regulator is necessary.

What’s Next

New Jersey has requested the U.S. Supreme Court to review and overturn the 3rd Circuit’s decision, which found Kalshi’s contracts not subject to New Jersey’s gambling laws (Knoxville News-Sentinel). This ongoing circuit split increases the likelihood that the U.S. Supreme Court may eventually address the matter to provide clarity on the regulatory authority over prediction markets.

Originally reported by Knoxville News-Sentinel·Published 7 Oct 2026, 14:32