Appeals court rules against Kalshi, says prediction markets can be regulated like gambling

A federal appeals court on Friday ruled that prediction market platforms can be regulated by states in a manner similar to gambling operations, handing a legal loss to Kalshi. The 6th U.S. Circuit Court of Appeals issued a unanimous opinion from a three-judge panel that sided with the states of Ohio and Tennessee. The court determined Kalshi failed to demonstrate that the contracts it offers on sports events qualify as "swaps."

The decision rejects Kalshi's argument that its contracts should be treated as financial derivatives falling under a different regulatory regime, instead affirming the states' ability to apply gambling-style rules to such platforms. The ruling represents a setback for Kalshi and for businesses in the prediction-market sector that have sought to avoid state-level gambling oversight.

Industry participants have been watching litigation over the regulatory status of prediction markets closely, because court outcomes help define whether platforms face state gambling laws or federal financial regulation. This opinion contributes to the legal landscape by supporting states' regulatory authority over some types of event-based contracts offered by prediction markets.

The court's finding that Kalshi did not show its sports-event contracts are "swaps" leaves open how other contracts or market structures might be treated in future cases. The ruling is described as the latest legal blow to the prediction-market industry, underscoring ongoing uncertainty about how such platforms will be regulated across different jurisdictions.