Kalshi Loses Appeal, Paving Way for Potential US Supreme Court Case
Prediction market platform Kalshi lost its appeal when a US appellate court ruled that Ohio and Tennessee have the authority to regulate sports-event contracts under state gambling laws. This ruling marks a significant step in the ongoing dispute over jurisdiction, potentially setting the stage for a Supreme Court review.
US 6th Circuit Court Ruling
On Friday, a three-judge panel of the US 6th Circuit Court of Appeals unanimously sided with the states of Ohio and Tennessee. The court ruled that Kalshi’s prediction contracts on sports events do not qualify as “swaps” under the Commodity Futures Trading Commission’s (CFTC) jurisdiction. This means that the states can regulate such contracts under their gambling laws.
Previously, the US 9th Circuit Court of Appeals issued a similar ruling against Kalshi, contrasting with an April decision by the 3rd Circuit Court of Appeals which allowed Kalshi to operate in New Jersey. This split among circuits highlights the complexity of regulating prediction markets.
Case Progression and Supreme Court’s Potential Role
The April ruling from the 3rd Circuit had determined that federal law preempts New Jersey’s regulations, enabling Kalshi to continue business during appeals. However, recent 6th and 9th Circuit decisions challenged this view.
On Wednesday, a group of state legislators submitted an amicus curiae brief to the US Supreme Court, urging it to address the jurisdictional dispute between Kalshi and state gaming authorities. This development could lead to a Supreme Court ruling that definitively assigns regulatory authority over prediction markets to either state governments or federal agencies.
Why it matters
The Kalshi case exemplifies a complex legal conflict between federal and state regulations concerning prediction markets, especially related to sports-event contracts. With contradictory appellate decisions emerging, the crucial question of which authority — state regulators or federal agencies like the CFTC — governs these markets may only be resolved by the Supreme Court. Its ruling will have lasting implications for the prediction market industry and gambling regulations, setting clear legal parameters for such contracts and oversight.
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