An American appeals court has handed state gambling regulators a significant victory in their dispute with Kalshi, ruling that the prediction-market company has not shown that federal commodities law shields its sports contracts from oversight in Ohio and Tennessee. The decision, issued on Friday, 25 September, could reshape how fast-growing event-betting platforms operate across the United States.
The Sixth US Circuit Court of Appeals considered two linked cases. It upheld an Ohio judge’s refusal to block state enforcement and overturned a Tennessee judge’s order that had temporarily prevented officials there from applying their gambling rules to Kalshi. The ruling concerns preliminary injunctions, so the underlying legal challenges are not yet finally resolved.
At the centre of the dispute is a question with consequences far beyond one company: when users buy a contract tied to the outcome of a match, are they trading a federally regulated financial instrument or placing a wager that a state may regulate? Kalshi argues that its status as a federally registered exchange places its contracts under the exclusive authority of the Commodity Futures Trading Commission, known as the CFTC.
The three-judge panel rejected Kalshi’s argument at this stage. In the court’s published opinion, Judge Julia Smith Gibbons reasoned that sports outcomes such as the number of corner kicks in a football match do not have the sort of inherent financial consequence contemplated by the statutory definition of a swap. A remote commercial effect, the panel said, does not turn every event into a financial hedge.
The judges also concluded that the Commodity Exchange Act does not prevent Ohio and Tennessee from enforcing their gambling laws against the sports contracts at issue. The opinion describes gambling regulation as a longstanding state responsibility and examines the federal law’s language, structure and purpose before reaching that view.
That distinction matters to consumers as well as companies. State sports-betting regimes commonly require licences, age checks, location controls and measures intended to protect customers. The Sixth Circuit noted that Ohio and Tennessee both set a minimum betting age of 21 and impose other obligations on operators. Kalshi’s national-exchange model has developed against a patchwork of state rules that can vary sharply from one border to the next.
Kalshi disagrees with the decision. A company spokesperson said the ruling demonstrates the difficulty of operating markets when legal requirements change between states, and said the company does not expect the decision to survive further legal review. Tennessee Attorney General Jonathan Skrmetti welcomed the outcome, arguing that sports wagering requires safeguards because it can cause harm.
The court’s decision deepens an existing disagreement among federal appeals courts. The Ninth Circuit ruled in August that Kalshi had not established a right to avoid Nevada’s gambling oversight, while the Third Circuit reached a more favourable preliminary conclusion for the company in a New Jersey case earlier this year. The split increases the likelihood of further appeals and possible consideration by the US Supreme Court, although that outcome is not assured.
Prediction markets have expanded from questions about elections and economic indicators into sports, entertainment and other everyday events. Supporters say their contracts can aggregate information and allow people to express a view about uncertain outcomes. Critics question whether the financial language used by platforms changes the practical experience of staking money on a result.
The answer will affect more than Kalshi. A platform seeking to serve customers nationally must decide whether to seek state gambling licences, change where its products are available, limit particular contracts or continue fighting for a single federal framework. Regulators, meanwhile, must decide how to supervise products that can resemble both trading and betting, sometimes on the same screen.
The Sixth Circuit’s opinion is therefore a legal milestone, not a final nationwide rule. It addresses Kalshi’s chances of obtaining early protection from state enforcement in two cases and leaves other courts and regulators to consider their own disputes. Customers should not assume that a contract’s presence on a federally registered exchange settles whether it is lawful to offer or use in every state.
For an international audience, the case illustrates a wider challenge for digital financial products: technology can cross borders far faster than consumer-protection rules do. As similar markets seek growth elsewhere, the American decisions may become a reference point in debates about who should regulate them and what protections users should expect.
Podium News invites readers working in technology, finance and consumer protection to share how prediction markets should be regulated, and what safeguards matter most when a platform turns real-world events into tradable contracts.
