US appeals court rules against Kalshi, says states can regulate prediction markets

On September 25, a US appeals court ruled against prediction markets operator Kalshi, stating that Ohio and Tennessee can regulate its event contracts under their gambling laws. The ruling by the 6th US Circuit Court of Appeals in Cincinnati adds to the ongoing debate over which entity should have authority to regulate the growing industry - state regulators or the federal Commodity Futures Trading Commission.

Kalshi expressed concern over the decision's survival, stating that markets cannot function with varying rules at each state line. Circuit Judge Julia Smith Gibbons, writing for the unanimous three-judge panel, argued that Kalshi did not present evidence that its sports event contracts should be regulated exclusively by the CFTC, and that the federal Commodity Exchange Act does not preempt the states' gambling laws.

The decision highlights the ongoing split among federal appeals courts on the issue, with two other courts previously ruling differently.