A federal appeals court ruled that states can enforce gambling laws against Kalshi, rejecting the prediction market's argument that it answers only to federal regulators. The unanimous Sixth Circuit panel sided with Ohio and Tennessee, holding that Kalshi's sports-event contracts do not qualify as "swaps" under the Commodity Exchange Act.
The court also found that even if the contracts were swaps, Congress did not preempt state gambling laws. The ruling said federal law's preemption covers only laws directly targeting the licensing and operation of designated contract markets, not state gambling rules that incidentally affect them.
The decision is the second appellate loss for Kalshi, after a Ninth Circuit defeat involving Nevada, and follows a Third Circuit win involving New Jersey. New Jersey has asked the Supreme Court to settle the question nationally, and a Fourth Circuit case in Maryland remains pending. Kalshi said it disagrees and does not believe the ruling will survive further review.