An appeals court has ruled against prediction market platform Kalshi, determining that its sports-related event contracts do not qualify as swaps and are therefore subject to state-level gaming regulations instead of federal oversight by the Commodity Futures Trading Commission.

A three-judge panel from the U.S. Court of Appeals for the Sixth Circuit made the decision on Friday, siding with state regulators in Ohio and Tennessee who had challenged Kalshi’s operations. The platform had sought injunctions to prevent the states from pursuing legal action, but while a Tennessee federal court granted relief, an Ohio court denied it.

This ruling adds to the growing number of appeals court decisions addressing the legal battle between state authorities and prediction market platforms. It increases the likelihood that the U.S. Supreme Court will eventually step in to resolve the dispute.

In its decision, the Sixth Circuit acknowledged that Kalshi had the right to initiate the lawsuit but rejected its claim that the contracts were federally regulated swaps. The court explained that although the contracts are based on specific events, they do not hinge on outcomes tied to financial, economic, or commercial consequences as defined under federal law.

Using the example of a New York Giants Super Bowl win, the judges noted that whether such a result constitutes an ‘event’ or an ‘outcome’ depends on how it is framed. If the event is the Giants winning, then their victory represents the occurrence of that event. However, if the event is the game itself, then the Giants’ win becomes the outcome.

«The appropriate interpretation turns on how the event is defined,» the ruling stated. «Since the statutory language does not clearly exclude outcomes from this definition, we will not impose such a restriction ourselves.»

The Third Circuit Court of Appeals previously ruled that the CFTC has authority over prediction markets, while the Eighth Circuit concluded that sports-related contracts are not swaps. This divergence among circuits strengthens the case for Supreme Court involvement, and one of the Third Circuit cases has already been appealed to the high court.

As stablecoins move into regulated finance, APAC is becoming a key proving ground. This report maps the region’s rules, use cases, and RLUSD’s role.

Why it matters:

As stablecoins move into regulated finance, APAC is becoming a key proving ground. This report maps the region’s rules, use cases, and RLUSD’s role.