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A federal judge in Ohio has ruled that Kalshi’s sports‑related event markets constitute gambling under state law, denying the platform’s request for a preliminary injunction and delivering one of the most consequential regulatory decisions the prediction‑market industry has faced to date.
Judge Rejects Kalshi’s Argument for Federal Preemption
In the ruling issued by U.S. District Judge Sarah D. Morrison, the court found that Kalshi cannot rely on the federal Commodity Exchange Act (CEA) to override Ohio’s gambling laws. Kalshi argued that its event‑contract markets — including those tied to sports outcomes — should be regulated as “swaps,” similar to financial derivatives. The judge disagreed, stating that sports‑event contracts do not fall within the traditional scope of swaps, which typically involve factors that directly influence commodity prices, such as currency exchange rates, weather, or energy costs.
Morrison also emphasized that accepting Kalshi’s interpretation would lead to “absurd results,” reinforcing that Congress did not design the CEA to preempt state jurisdiction over sports betting.
Ohio Attorney General Praises the Decision
Ohio Attorney General Dave Yost publicly applauded the ruling, stating that Kalshi’s offerings “look an awful lot like gambling” and that the company cannot shield itself using federal commodities law. Yost called the decision “a big win for Ohio,” underscoring the state’s stance that prediction markets involving sports fall squarely within its gambling regulatory framework.
Kalshi Plans to Appeal the Ruling
Kalshi responded by saying it “respectfully disagrees” with the decision and plans to appeal, pointing out that a federal court in Tennessee recently ruled differently in a similar case. The conflicting rulings set up what could become a meaningful judicial divide over how prediction markets should be regulated across the U.S.
The platform maintains that its contracts serve a broader economic purpose and that prediction markets deliver value as risk‑hedging tools — a stance supported by public comments from CFTC Chair Michael Selig, who has argued that event‑based contracts provide useful functions for society.
Broader Regulatory Implications for Prediction Markets
This decision represents a major setback for Kalshi and a pivotal moment for the prediction‑market landscape.
- It reinforces state authority over sports‑related wagering.
- It highlights the increasing friction between federal regulators and state gambling enforcement.
- It deepens the emerging circuit split, particularly with Tennessee’s more permissive stance.
Platforms like Polymarket and others operating in the event‑contract space will be watching closely, as the ruling signals that sports‑based prediction markets may face heightened scrutiny and stricter enforcement at the state level.
