Crypto exchange Kalshi’s legal battle over sports-event contracts hit another roadblock on Friday. The 6th US Circuit Court of Appeals ruled that the states of Ohio and Tennessee are free to regulate the prediction market’s sports contracts under their own state gambling statutes, handing the company a loss before a unanimous three-judge panel.
Writing for the panel, Circuit Judge Julia Smith Gibbons found that Kalshi had not established its sports-event contracts qualify as “swaps,” the legal classification the company relied on to argue that oversight belongs exclusively to the Commodity Futures Trading Commission (CFTC). Gibbons also concluded that the federal Commodity Exchange Act does not override the gambling laws Ohio and Tennessee have in place.
Further, Judges added a backup ruling stating that even if Kalshi’s contracts were later found to meet the definition of a swap, federal commodities law still would not push aside the two states’ gambling statutes. Even if Kalshi eventually wins the argument over whether its contracts count as swaps, the panel’s preemption conclusion would remain intact and the states would still come out ahead.
Friday’s decision echoes a ruling issued last month by the 9th Circuit Court of Appeals, which reached a similar conclusion against Kalshi. This outcome broke from the direction set by the 3rd Circuit Court of Appeals in April, when judges found Kalshi likely to prevail in its claim that federal law preempts New Jersey’s gambling regulations, a decision that has allowed the company to keep operating in that state while its appeal continues.
