6th Circuit Rules States May Regulate Kalshi Sports Contracts

The 6th U.S. Circuit Court of Appeals ruled Friday that Ohio and Tennessee have the authority to apply state gambling laws to sports-related event contracts offered by the prediction market platform Kalshi. In a unanimous decision, the court rejected Kalshi's argument that these contracts are financial derivatives, or swaps, which would place them under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC).

Writing for the court, Circuit Judge Julia Smith Gibbons stated that gambling regulation is a core part of a state's police power. The court determined that the Commodity Exchange Act does not preempt state laws because wagering on sports outcomes does not align with the act's primary purpose of managing financial risk.

Tennessee Attorney General Jonathan Skrmetti praised the ruling, arguing that Kalshi attempted an "end run" around state laws to avoid gambling rules and taxes. The decision increases the conflict among federal appeals courts; while the 9th Circuit recently allowed Nevada to regulate such contracts, the 3rd Circuit previously ruled that the CFTC holds exclusive authority in New Jersey. New Jersey has since petitioned the U.S. Supreme Court to resolve these conflicting interpretations.