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A three-judge Sixth Circuit panel ruled that Kalshi’s sports-event contracts are not federally regulated swaps and are instead subject to state gaming laws. The decision addresses Kalshi’s efforts to block regulators in Ohio and Tennessee from suing over the contracts, with different outcomes in the lower courts in those states.
Why it matters
The ruling adds to a circuit split over whether the Commodity Futures Trading Commission has authority over prediction markets. The Third Circuit found the CFTC had jurisdiction, while the Eighth Circuit also ruled that sports-related contracts were not swaps. The Third Circuit case has already been appealed to the Supreme Court, and the latest disagreement gives the justices further reason to consider the issue.
States argue that sports prediction markets compete with state-regulated gambling platforms while avoiding state taxes. They have also raised concerns that these services can be available to people as young as 18, compared with the age of 21 used by most state gambling operators.
Market impact
The Sixth Circuit agreed Kalshi could bring its cases but rejected the argument that the contracts at issue were federally regulated swaps. Its reasoning turned on how an event is defined: the panel said the contracts did not depend on events associated with a potential financial, economic or commercial consequence under the relevant statute.
The decision adds legal uncertainty for prediction-market operators offering sports contracts across state lines. The Supreme Court’s handling of the existing appeal could help determine whether federal oversight or state gaming rules govern these products.
Frequently asked questions
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What did the Sixth Circuit decide about Kalshi’s sports contracts?
The panel ruled the contracts are not federally regulated swaps and are subject to state gaming laws.
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Which state cases did the Sixth Circuit ruling address?
The ruling addressed Kalshi’s efforts to block regulators in Ohio and Tennessee from suing over its sports contracts.
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How do the appeals court rulings differ?
The Third Circuit found the CFTC had jurisdiction over prediction markets. The Sixth and Eighth Circuits ruled that sports-related contracts were not swaps.
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Why are states challenging sports prediction markets?
States argue the platforms compete with state-regulated gambling services without paying state taxes, and note that they can serve customers as young as 18.
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Why could the Supreme Court weigh in on the dispute?
Appeals courts have reached conflicting conclusions about federal oversight of prediction markets, and the Third Circuit case has already been appealed to the Supreme Court.
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