Prediction market Kalshi lost an appeal when the 6th US Circuit Court of Appeals ruled that Ohio and Tennessee can regulate sports-event contracts under their state gambling laws.
A three-judge panel ruled unanimously against Kalshi on Friday, siding with Ohio and Tennessee. The court found that Kalshi's sports-event contracts do not qualify as "swaps" under the jurisdiction of the Commodity Futures Trading Commission (CFTC), the federal agency that typically oversees such instruments.
The decision adds complexity to an emerging legal landscape for prediction markets. The 9th Circuit Court of Appeals issued a similar ruling last month, but contradicted an April decision by the 3rd Circuit Court of Appeals, which allowed Kalshi to operate in New Jersey while its appeals process continues.
The 3rd Circuit ruled in April that federal law likely preempts New Jersey's regulations, creating a split among federal courts on the question of regulatory jurisdiction. This conflicting guidance has set the stage for a potential Supreme Court case.
State lawmakers have already become involved in the dispute. Cointelegraph reported Wednesday that a group of state lawmakers filed an amicus brief with the Supreme Court, urging the high court to resolve whether state authorities or federal agencies have jurisdiction over prediction market companies.
