Litigation Mounts Against Kalshi

Federal Appeals Courts Siding With States

Kalshi's sports-event contracts are under increasing scrutiny as federal appeals courts side with states in their fight against the company's offerings. The Sixth Circuit's ruling in Ohio and Tennessee allows both states to enforce their gambling laws, while a similar loss out West has further exacerbated the issue.

Preemption and Federal Oversight

Kalshi's core legal argument is based on preemption, claiming that federal regulation of the company should shield it from state oversight. However, the Sixth Circuit rejected this view, finding that Kalshi's contracts do not qualify as 'swaps' under the Commodity Exchange Act.

Geofencing and Local Gambling Laws

Courts have upheld geofencing as a compliant approach for Kalshi, allowing the company to limit its retail operations in states where local gambling laws apply. The company has had to adapt its strategy to comply with state regulations.

Implications for Kalshi and Prediction Markets

The legal question at the center of the issue extends beyond Kalshi, with courts deciding whether event contracts tied to sports can be governed solely at the federal level. The divergent outcomes raise the possibility that the US Supreme Court could eventually take up the issue.