Kalshi lost another appeals case. Can states regulate prediction markets as gambling?
The Sixth Circuit ruled against Kalshi in Ohio and Tennessee, raising questions about whether states can regulate prediction markets as gambling.Summary
The Sixth Circuit ruled on September 25 that Kalshi's sports event contracts are not protected from Ohio's and Tennessee's state gambling laws, affirming Ohio's denial of a preliminary injunction and vacating Tennessee's injunction that had shielded the company. The three-judge panel identified two independent grounds for its decision: first, Kalshi had not demonstrated that its sports contracts qualify as "swaps" under the Commodity Exchange Act; second, even assuming the contracts were swaps, the federal statute would not displace state gambling regulations. The court noted that sports results lack the inherent financial consequences contemplated by the swap definition, and that federal exclusive jurisdiction over swaps does not explicitly repeal state law.
The ruling creates a notable circuit split. The Third Circuit previously upheld a preliminary injunction protecting Kalshi in New Jersey, while the Ninth Circuit allowed Nevada to enforce its gaming rules. The Sixth Circuit suggested geofencing as a practical compliance mechanism, arguing that location-based access restrictions would not make compliance impossible, though Kalshi contends such measures would fragment the national market. Importantly, both cases concern preliminary injunctions rather than final merits judgments, and they have been returned to lower courts for continued litigation. No nationwide ban on prediction markets has been issued, and the scope of the decision is limited to sports event contracts in Ohio and Tennessee.
(Source：Crypto News)