Kalshi was hit with another roadblock this week, when the Sixth Circuit ruled that certain states can regulate against the prediction market platform.
The Sixth Circuit ruled Kalshi a sizable legal setback on Friday, declaring that Ohio and Tennessee would retain jurisdiction over Kalshi in their respective states. The ruling says that federal commodities law won’t prevent Ohio and Tennessee from enforcing their own state gambling laws, while both Michigan and Kentucky could also end up covered by this ruling.
Kalshi Ruling Impacts Ohio and Tennessee
Ohio and Tennessee were the only two states involved in the recent appeals, but this ruling now gives them the right to decide Kalshi’s fate within their borders.
Kalshi had argued their federally regulated contracts couldn’t be regulated by the states since they fall under the Commodity Exchange Act. However, the Sixth Circuit denied their position and ruled in favor of the states.
While this is a win for Tennessee and Ohio, only two of the four states the Sixth Circuit governs have officially been granted control in regulatory proceedings. This also is not a nationwide ruling, as there are still numerous ongoing cases involving other U.S. states.
Michigan and Kentucky Could Come Next
The Sixth Circuit oversees Ohio, Tennessee, Kentucky, and Michigan. Conventional wisdom suggests if they’re ruling in favor of Ohio and Tennessee, it may only be a matter of time before they back up Michigan and Kentucky in their battle with Kalshi as well.
The ruling doesn’t automatically transfer to those states, but federal district courts in those states are theoretically bound to what the Sixth Circuit rules elsewhere.
This heats up the Michigan prediction market debate, which has produced a back-and-forth between the state and prediction markets for some time. While this latest ruling doesn’t make it official, the clock is ticking on Michigan and Kentucky also getting the upper hand against the prediction market industry.
Developing Circuit Split Pushes Fight to Supreme Court
The Sixth Circuit isn’t setting the tone for the entire United States, but it’s cementing a new ruling for two states, and that foundation is bound to spread to at least two more.
In the short-term, this is at the very least a considerable setback for Kalshi’s operations in both Ohio and Tennessee. The Sixth Circuit’s ruling likely means Kalshi should prepare for two more losses in Michigan and Kentucky, too.
Of course, this doesn’t wrap up litigation across the U.S. In fact, it may only make it murkier. With inconsistency throughout the states, this conversation may have a final destination: the U.S. Supreme Court.
The Trade Handle Prediction Markets Take
Kalshi lost a battle here, but the prediction market regulation war is far from over. Kalshi can opt to appeal this ruling, for starters, while even a loss would still give way to a battle over specific regulation optics.
Kalshi CEO Tarek Mansour has been transparent about his company’s stance. They don’t view their platform to be in the same realm of sports betting sites, while at the same time they embrace regulation.
For now, Kalshi can continue to fight the good fight against individual states, while they can hang their hat on the fact that they won in the Third Circuit.
That said, all signs lead to a likely run-in with the Supreme Court. Prediction markets and U.S. states aren’t cohesively landing on a consistent outcome all parties can agree to. For that to occur, federal regulators, Congress, and/or the Supreme Court may need to intervene to get to a desired result.