Kalshi loses its appeal, raising the possibility of a Supreme Court case.

Prediction market Kalshi lost on appeal on Friday when the 6th US Circuit Court of Appeals ruled that Ohio and Tennessee may regulate its sports-event contracts under their state gambling laws. A three-judge panel sided unanimously with the two states, finding that Kalshi failed to show that the contracts are “swaps” under the jurisdiction of the Commodity Futures Trading Commission (CFTC).

Why the swap argument mattered

Kalshi has argued that federal commodity law governs the contracts it offers, which would place them within the CFTC’s regulatory framework rather than under state gambling rules. The Sixth Circuit rejected that argument in this appeal. By ruling against Kalshi, the court left state gaming authorities able to treat the company’s sports-event contracts as gambling products subject to state regulation.

The case sits at the boundary of two regulatory systems. If the contracts are swaps, the CFTC is the primary federal referee. If they are gambling instruments, state gaming authorities can apply state gambling law instead.

A split among federal appellate courts

The ruling followed a similar decision from the 9th Circuit Court of Appeals last month. It also broke from an April decision by the 3rd Circuit Court of Appeals, which allowed Kalshi to do business in New Jersey while its appeal process proceeds. That April ruling said Kalshi was likely to succeed with its argument that federal law preempts New Jersey’s regulations.

The divergent circuit rulings have set up a potential Supreme Court case. Cointelegraph reported on Wednesday that a group of state lawmakers filed an amicus brief with the Supreme Court urging it to weigh in on the dispute between Kalshi and state gaming authorities. A Supreme Court review could help resolve whether state authorities or federal agencies have jurisdiction over prediction market companies.

What the ruling means for prediction markets

For Kalshi, the immediate effect is that Ohio and Tennessee can continue regulating its sports-event contracts under state gambling law while the company pursues its federal preemption argument in other cases. For other prediction market companies, the ruling shows that courts are focused on whether the contracts fit the legal definition of swaps, not only on how the companies describe their products.

The next legal question is whether the Supreme Court will take up the dispute. A decision could clarify the jurisdictional line between the CFTC and state gaming authorities, reducing the patchwork of rules now facing companies and users in different regions.

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