Appeals Court Says Ohio, Tennessee Can Regulate Kalshi Under Gambling Laws

Kalshi lost another round Friday in his fight over whether states can treat prediction markets like games of chance. A three-judge panel of the 6th U.S. Circuit Court of Appeals in Cincinnati ruled that Ohio and Tennessee could apply their gambling laws to Kalshi’s event contracts, Reuters reported.

Kalshi’s central argument is that his sports contracts are “swaps,” financial products that fall under the exclusive oversight of the CFTC rather than state gaming rules. The court rejected this.

Writing for the panel, Circuit Judge Julia Smith Gibbons said swaps generally refer to financial instruments used to hedge risks, not contracts related to gaming. She added that regulating gambling is an essential part of a state’s police power and that the federal Commodity Exchange Act does not preempt Ohio or Tennessee gambling laws, according to Reuters.

Gibbons also questioned how betting on the number of corners in a football game, or on a far parlay, met federal law’s goal of helping people manage financial risks.

The ruling overturned a preliminary injunction that had barred Tennessee from enforcing its gambling laws against Kalshi. It also upheld a lower court’s refusal to grant Kalshi a similar injunction in Ohio. Tennessee Attorney General Jonathan Skrmetti called the ruling a “big victory” for the state. Kalshi said he expects the decision to be reversed.

The unanimous decision deepens divisions among federal appeals courts over who should regulate this fast-growing sector: individual states or the Commodity Futures Trading Commission (CFTC). A division between appeals courts often makes review by the Supreme Court more likely, but there are no guarantees.

SCOTUS receives thousands of petitions a year and agrees to hear very few. Similar cases are underway in Connecticut, New York, Arizona, Minnesota and other states.