2
US appeals court rules states have authority to regulate prediction market Kalshi's sports contracts
The US Court of Appeals for the Sixth Circuit ruled on the 25th that states have the right to regulate sports-related event contracts on prediction market platforms. The case concerned a lawsuit brought by prediction market Kalshi as plaintiff against authorities in Ohio and Tennessee, and a three-judge panel unanimously held that state gambling laws may be applied to Kalshi's sports-related event contracts. The appeals court rejected Kalshi's arguments on two grounds: first, that Kalshi's sports event contracts, while based on the outcomes of sporting events, cannot be shown to meet the requirements for being considered a "swap" under the Commodity Exchange Act because they do not represent events with direct financial or economic consequences; and second, that even if such contracts did qualify as swaps, the Commodity Exchange Act does not expressly or implicitly preempt the gambling laws of Ohio and Tennessee. This ruling marks the second win for the states in the appeals court's decisions on the regulation of Kalshi; in August, the Ninth Circuit Court of Appeals sided with Nevada, while in April the Third Circuit Court of Appeals reached the opposite conclusion and backed Kalshi with respect to New Jersey. Kalshi spokesperson Dani Lever disputed the decision, commenting that the courts themselves do not agree on the fundamental points. The US Commodity Futures Trading Commission has so far sued nine states in order to defend its exclusive authority to regulate "event contracts."