6th Circuit sides with Tennessee and Ohio in Kalshi dispute over state gambling laws

A US appeals court has ruled in favor of Tennessee and Ohio in their dispute with prediction market platform Kalshi, finding that the states can continue to apply their gambling laws to the company. The decision came on September 25 from the 6th US Circuit Court of Appeals in Cincinnati.

The ruling adds to a growing divide across the country over whether gaming laws can be used against gambling-like platforms. Kalshi and similar platforms argue that their products are swaps, which fall under federal law and are overseen by the Commodity Futures Trading Commission. The states counter that sports event contracts are too closely tied to sports betting. They also point out that the contracts are available to users from age 18, while the legal sports betting age in most states is 21.

According to the report, the Cincinnati court found that Kalshi had not shown its sports event contracts to be genuine swaps that must be regulated by the CFTC. Judge Gibbons also wrote that states have the exclusive authority to decide what counts as gambling and to regulate it, describing this as the very heart of a state's police power.

On the Commodity Exchange Act, the judge said the law was intended to serve the national interest by helping manage and assume risk and by providing price information. She said it was difficult to see how determining the probability that a set number of corner kicks will be taken in a soccer match, or that a 30-leg parlay will hit, would advance those goals. The three-judge panel was unanimous.

Kalshi spokesperson Dani Lever responded that the ruling shows why a state-by-state patchwork does not work. She said markets cannot operate when rules change at every state line, which is why Congress created a single federal regulator with nationwide rules.

The decision contrasts with a more recent ruling by Judge Martha Pacold of the federal district court in Chicago. She acknowledged that sports event contracts resemble sports betting but did not accept Illinois' interpretation or its demand to regulate them under gaming laws. Kalshi founder Luana Lopes Lara called that ruling beautiful. The conflicting outcomes leave the legal status of sports event contracts unsettled across US jurisdictions.