Appeals Court Backs State Authority to Regulate Kalshi Prediction Markets

Circuit Judge Julia Smith Gibbons, writing for the unanimous panel, dismantled the argument that prediction markets function as risk-hedging financial instruments. The court affirmed that states retain core police powers to regulate gambling, concluding that the Commodity Exchange Act does not preempt local oversight in this sector. Gibbons specifically questioned how betting on sports outcomes, such as corner kicks in a soccer match, aligns with the federal objective of managing financial risk.

This ruling overturns a preliminary injunction that had shielded Kalshi from Tennessee’s gambling regulations and upholds a lower court’s refusal to grant similar relief in Ohio. While Tennessee Attorney General Jonathan Skrmetti hailed the outcome as a victory, Kalshi remains defiant, expressing expectations that the decision will eventually be overturned. The ruling creates a deepening conflict among federal appeals courts regarding the jurisdictional boundary between individual states and the Commodity Futures Trading Commission, a division that may eventually force the Supreme Court to intervene as similar litigation unfolds across multiple states.