Kalshi Loses Appeals in Both Ohio & Tennessee

The Sixth U.S. Circuit Court of Appeals doesn't believe Kalshi

The standard argument put forth by Kalshi's lawyers was again implemented. In this case, it was heard by the Sixth U.S. Circuit Court of Appeals in Cincinnati. Kalshi's lawyers argued that sports-event contracts are not sports betting. They are derivative swaps that are under the auspices of federal regulation by the CFTC.

The three judges on the panel weren't buying it.

Circuit Judge Julia Smith Gibbons wrote the opinion for the unanimous three-judge panel. The judges ruled that Kalshi did not prove that its sports-event contracts were “swaps” that should be subject to the exclusive regulatory powers of the CFTC. She also wrote that the federal CEA did not overrule the gambling laws of Ohio or Tennessee.

In her opinion, Gibbons wrote that “swaps” generally refer to financial measures, indices, and instruments that people employ when hedging against risks. They are not gaming-related contracts.

She noted that gambling regulation “lies at the heart of the state’s police power.” Furthermore, the judge stated that Congress has given states primary responsibility to decide what forms of gambling can take place within their boundaries.

Gibbons also pointed out that the CEA’s “core purpose” was to protect the national interest. It is supposed to be providing a means to manage and assume risk, and to obtain pricing information.

“It is, therefore, difficult to see how determining the probability that a certain number of corner kicks will be taken in a given soccer game — or that a 30-leg parlay will hit — would serve (to) advance those goals,” Gibbons wrote.

States celebrate their court victory

Representatives of both the Ohio and Tennessee state governments were in a jovial mood following their win in court.

Tennessee Attorney General Jonathan Skrmetti felt the correct decision was reached. He cited it as a “great win” for the state.

“Sports wagering is heavily regulated because it can do a lot of harm, and I’m glad we thwarted Kalshi's efforts to remove every safeguard and put Tennessee sports bettors at risk,” Skrmetti said, according to reporting by gvwire.com.

Ohio Governor Mike DeWine was vowing to enforce state gambling laws to rein in Kalshi.

"These so-called prediction markets, which are really gambling, nothing more than that, they're just trying to get around the law, don't want to play by the same rules everybody else does," DeWine told News 5 Cleveland.

Kalshi still confident that it will win this battle

This decision affirmed a previous ruling in Ohio and overturned a prior decision in Tennessee.

A Kalshi representative was exuding confidence that they will ultimately win this fight in a higher court.

“The ruling shows exactly why a state-by-state patchwork doesn’t work,” Kalshi spokesperson Dani Lever said. “Markets can‘t operate when the rules change at every state line, which is why Congress created a single federal regulator with nationwide rules.”