Kalshi loses 6th Circuit appeal over Ohio and Tennessee sports contracts
Kalshi loses appeal over sports-event contracts
Kalshi, a prediction market where users trade contracts on the outcome of future events, lost an appeal in a US federal court. The 6th US Circuit Court of Appeals ruled on Friday that Ohio and Tennessee can regulate the company's sports-event contracts under their state gambling laws.
A three-judge panel sided unanimously with the two states. The panel found that Kalshi did not show that its sports-event contracts are 'swaps' that fall under the authority of the Commodity Futures Trading Commission (CFTC), the US regulator that oversees derivatives such as futures and swaps. A swap is a financial contract whose value is tied to an underlying asset or event.
Key points from the case
- The 6th US Circuit Court of Appeals ruled against Kalshi on Friday in a unanimous decision by a three-judge panel.
- Ohio and Tennessee argued their state gambling laws apply to Kalshi's sports-event contracts.
- The court found Kalshi failed to prove those contracts are swaps regulated by the CFTC.
- The outcome followed a similar ruling against Kalshi from the 9th Circuit Court of Appeals the month before.
- The decision adds to a split between appeals courts, which has raised the possibility of a Supreme Court case.
Where the appeals courts stand
The 6th Circuit's ruling echoed a decision from the 9th Circuit Court of Appeals a month earlier, which also went against Kalshi.
Both differ from an April decision by the 3rd Circuit Court of Appeals, which allowed Kalshi to keep doing business in New Jersey while its appeal moves forward. That April ruling said Kalshi was likely to succeed in arguing that federal law overrides, or preempts, New Jersey's regulations.
Preemption is the legal idea that a federal law can take priority over a state law when the two conflict.
State lawmakers ask the Supreme Court to step in
A group of state lawmakers filed an amicus brief with the Supreme Court asking it to weigh in on the dispute between Kalshi and state gaming authorities, according to a Cointelegraph report published on Wednesday. An amicus brief is a filing by an outside party that asks a court to consider its views.
That filing said a Supreme Court decision could settle whether state authorities or federal agencies have jurisdiction over prediction market companies.
What is confirmed
The 6th US Circuit Court of Appeals ruled against Kalshi on Friday, siding with Ohio and Tennessee. The panel was unanimous and found Kalshi did not demonstrate that its sports-event contracts are swaps under CFTC jurisdiction. The 9th Circuit ruled against Kalshi in the previous month. The 3rd Circuit's April decision allowed Kalshi to operate in New Jersey while its appeal continues. A group of state lawmakers has filed an amicus brief asking the Supreme Court to take up the issue.
What is still unclear
It is not yet known whether the Supreme Court will agree to hear the case, and no timeline has been announced. It is also unclear how Kalshi's operations in New Jersey and other states will be affected as the appeals courts continue to differ. Kalshi has not commented in the supplied material.
Why the jurisdiction question matters
The case is about who gets to set the rules for prediction markets: state gambling regulators or federal agencies such as the CFTC. The appeals courts have not agreed on that question, which is why the dispute may end up before the Supreme Court. A ruling there could affect how prediction market companies are regulated across the United States.
Sources
Newisty Editorial Team covers technology, cryptocurrency, digital products, online platforms, developer tools and the wider digital economy. Our content is researched from official sources, company announcements, public documentation, market data and other primary or reputable sources. Articles are reviewed and edited before publication for clarity, accuracy and useful context.