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A federal appeals court has ruled that states may regulate prediction market platforms such as Kalshi in the same way they regulate gambling. The decision adds another development to the legal dispute over whether federal or state authorities should oversee sports-related event contracts offered by prediction market companies.
The 6th US Circuit Court of Appeals made its ruling on Friday following consolidated cases from Ohio and Tennessee. In their ruling, the court unanimously ruled in favor of both states over Kalshi.
According to the ruling, Kalshi failed to prove that the sports event contracts it entered into are considered swaps and fall under the regulation of the Commodity Futures Trading Commission (CFTC). The decision became another setback for the prediction market platform as legal challenges continue in several states.
Court Rejects Kalshi’s Argument
Circuit Judge Julia Smith Gibbons wrote the opinion for the panel. The court stated that even if Kalshi had adequately proven that its sports-event contracts were swaps, the Commodity Exchange Act would still not override state gambling laws.
Kalshi had argued that federal law prevented states from regulating its platform as gambling. However, the 6th Circuit did not agree with that position. The ruling allows Ohio and Tennessee to continue asserting authority over prediction market activity within their jurisdictions.
This was after the 9th Circuit Court of Appeal in the United States had made a similar determination the previous month. The courts have made determinations that are quite different from a ruling that was made in April.
In the previous case, the 3rd Circuit Court allowed Kalshi to operate in New Jersey as it appealed its determination. The court found that Kalshi was likely to succeed in its claim that federal law takes priority over New Jersey’s efforts to regulate the platform.
Conflicting Decisions Build Pressure
The differing court decisions have created a legal divide among federal appeals courts. The 6th and 9th Circuits have supported the ability of states to regulate prediction markets, while the 3rd Circuit took a different view in the New Jersey case.
This disagreement could bring the matter before the U.S. Supreme Court. Earlier this month, New Jersey asked the justices to decide how prediction markets should be regulated.
The Supreme Court receives thousands of petitions every year, although it often considers cases involving major legal questions where appeals courts have issued conflicting rulings. The different decisions involving Kalshi could place the dispute within that category.
The legal battle centers on the question of whether prediction market platforms are regulated solely at the federal level or whether individual states can treat the services as gambling under their own laws.
States Continue Regulatory Push
A bipartisan group of states has continued to challenge Kalshi and similar platforms in an effort to maintain state authority over the services. At the same time, President Trump has supported the growth of prediction markets and backed the CFTC having exclusive jurisdiction over the platforms.
There are currently 20 states involved in active litigation over whether prediction markets can be regulated by state governments. The cases reflect the continuing disagreement between state regulators and companies that operate event-based trading platforms.
In July, 44 states signed a letter addressed to the CFTC. The states argued that the agency does not have the authority to regulate contracts tied to sports events.
Kalshi did not immediately respond to a request for comment following the 6th Circuit’s ruling. As cases continue in different courts, the issue of who holds regulatory power over prediction markets remains unresolved.
Source: Kark.com
