A US appeals court has ruled that Ohio and Tennessee may apply their gambling laws to Kalshi, rejecting the company’s claim that its sports-event contracts are swaps regulated exclusively by the federal Commodity Futures Trading Commission (CFTC). The unanimous Sixth Circuit decision is another setback for Kalshi and strengthens states’ ability to challenge its sports betting operations.

The judges said the contracts do not meet the legal definition of swaps because any economic effects are downstream of the sporting events. They also said federal law does not prevent states from enforcing gambling rules against prediction markets, even if the contracts were swaps. The ruling upheld a decision against Kalshi in Ohio and overturned a Tennessee ruling in its favour; it adds to a split among appeals courts, with the Third Circuit ruling for Kalshi and the Ninth against it, while a Fourth Circuit case is pending.