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- Conflicting federal appellate rulings are creating a complex jurisdictional patchwork for sports-event contracts as courts weigh state gambling enforcement against federal commodities oversight.
- The growing judicial split, highlighted by a multi-million-dollar penalty notice in Ohio, underscores the regulatory uncertainty facing prediction market operators seeking nationwide market access.
Federal appeals courts have issued conflicting preliminary rulings on whether states can enforce gambling laws against Kalshi’s sports-event contracts, creating a growing split over how federal commodities law applies to prediction markets tied to sports.
The divide matters because Kalshi says its contracts are federally regulated swaps overseen by the Commodity Futures Trading Commission, while several states argue they are still subject to state gambling laws. The rulings so far are preliminary, not final decisions on the merits, but they point in opposite directions across major jurisdictions.
New Jersey ruling conflicts with Nevada, Ohio and Tennessee decisions
The 3rd U.S. Circuit Court of Appeals affirmed a preliminary injunction blocking New Jersey regulators from enforcing the challenged state gambling laws against Kalshi. But the 9th Circuit affirmed in part a district court order dissolving Kalshi’s preliminary injunction against enforcement in Nevada.
The 6th U.S. Circuit Court of Appeals, in a Sept. 25 opinion involving Ohio and Tennessee, said other appeals courts had addressed “substantially the same question” and reached opposite results.
In that case, the 6th Circuit held that Kalshi had not shown its sports-event contracts qualify as swaps under the Commodity Exchange Act. The court also said that even if the contracts were swaps, federal law would not block Ohio and Tennessee from enforcing the gambling laws at issue.
That leaves Kalshi with a favorable preliminary ruling in New Jersey, but setbacks in Nevada, Ohio and Tennessee.
Ohio enforcement details raise the stakes
The dispute is especially significant in Ohio, where the Ohio Casino Control Commission previously directed Kalshi to stop offering sports-event contracts to Ohio residents without a state sports-gaming license.
The commission later issued an April 14 notice of intent seeking a $5 million civil penalty or monetary fine. That notice alleged Kalshi had more than 35,000 Ohio consumers using its platform. It also alleged the company made sports contracts available to people ages 18 through 20 and did not comply with some Ohio rules involving voluntary exclusion, advertising and tax requirements.
The CFTC backed Kalshi in a May 12 court filing, arguing the contracts are swaps and that federal law gives the agency exclusive authority over swaps traded on federally regulated exchanges. The 6th Circuit rejected that argument in the preliminary-injunction fight involving Ohio and Tennessee.
What comes next
The appeals court rulings do not finally resolve the underlying cases, and the issue could still end up before the U.S. Supreme Court.
New Jersey regulators have already asked the Supreme Court to review the 3rd Circuit decision favoring Kalshi. The Court has not agreed to hear the case, and Kalshi’s response deadline was extended to Nov. 9.
A similar Kalshi appeal involving Maryland was also still pending when the 6th Circuit issued its Sept. 25 opinion, leaving open the possibility of further appellate guidance before any final nationwide resolution.
Source: As reported by news.google.com.
