Appeals court rules states can regulate sports prediction markets

Key Points:

• The 6th U.S. Circuit Court of Appeals ruled unanimously that Ohio and Tennessee can regulate sports-related event contracts on prediction market platforms under their state gambling laws, rejecting Kalshi's claim that such contracts are swaps regulated exclusively by the Commodity Futures Trading Commission (CFTC).
• The court held that Kalshi's sports-event contracts do not meet the statutory definition of swaps, and that the Commodity Exchange Act does not preempt state gambling laws, overturning a previous Tennessee federal court ruling in Kalshi's favor.
• This decision marks the second major appellate court defeat for prediction market platforms, following a similar ruling by the 9th Circuit, while the 3rd Circuit ruled in favor of CFTC’s exclusive regulatory authority, highlighting ongoing legal conflicts across jurisdictions.
• Tennessee Attorney General Jonathan Skrmetti emphasized the importance of state regulation to protect consumers and enforce gambling rules, while Kalshi criticized the patchwork of state laws and reiterated the need for a single federal regulator.
• The Supreme Court may soon decide whether to hear related cases, including New Jersey’s appeal of the 3rd Circuit ruling, as legal battles continue over whether sports-related event contracts are financial swaps or gambling.