The U.S. Court of Appeals has ruled that state gambling regulations can be applied to sports event contracts on the prediction market platform Kalshi.
According to The Block on November 27, the U.S. Sixth Circuit Court of Appeals sided with Ohio and Tennessee in their lawsuit against Kalshi.
Kalshi had argued that as a federally regulated prediction market, its sports event contracts should be subject to federal commodity laws rather than state gambling laws.
However, the court determined that the outcomes of sporting events are not directly linked to financial or economic results. While game results may impact sponsors, advertisers, and local economies, the court deemed these effects too remote, indirect, and speculative.
As a result, the Sixth Circuit upheld an Ohio court’s decision from March to deny Kalshi’s request for a temporary restraining order.
Kalshi countered, stating that if regulations vary by state, the market cannot function effectively. They argued that this is precisely why Congress established a single federal regulatory agency to apply uniform rules nationwide.
Appellate rulings regarding Kalshi have been mixed. While the Ninth Circuit ruled against Kalshi in a Nevada lawsuit last month, the Third Circuit sided with the company in an April case against New Jersey.
Currently, more than a dozen state governments across the U.S. have taken regulatory action or initiated lawsuits against Kalshi over its sports event contracts.