TLDR
- A federal judge in Ohio determined that Kalshi’s sports-based prediction markets constitute gambling activities subject to state regulation.
- Kalshi’s defense that its offerings are federally-regulated “swaps” under commodity law was rejected by the court.
- State Attorney General Dave Yost celebrated the decision as a significant victory for Ohio on social media.
- The prediction market company intends to challenge the ruling, citing a contradictory Tennessee federal court decision.
- Similar rulings against Kalshi have emerged from courts in Massachusetts and Nevada in recent weeks.
The New York-headquartered prediction market operator Kalshi experienced a significant legal setback in Ohio recently when a federal judge determined that its sports markets fall under gambling regulations and state jurisdiction.
U.S. District Judge Sarah Morrison rejected Kalshi’s motion for an injunction that would have blocked the Ohio Casino Control Commission from enforcement actions. The regulatory body had sought to prevent Kalshi from functioning as an unlicensed sports betting operation within state borders.
The platform’s defense centered on classifying its contracts as “swaps” — financial derivatives governed by federal oversight through the Commodity Exchange Act. Judge Morrison dismissed this interpretation.
In her ruling, Morrison explained that legitimate swaps connect to factors such as foreign exchange fluctuations, meteorological conditions, and energy pricing — elements with direct commodity market impact. A basketball game’s final score fails this criterion, she determined.
“The number of points scored in the Huskies-Bobcats game does not,” she wrote, noting that accepting sports contracts as swaps would produce “absurd” outcomes.
The judge’s 21-page decision found no indication that Congress designed federal commodity legislation to supersede state authority over sports wagering.
Ohio Attorney General Dave Yost responded swiftly to the decision. “Kalshi argued the federal Commodity Exchange Act preempts enforcement of Ohio law. Nope,” he posted on X. “These ‘prediction markets’ have exploded and look an awful lot like gambling. Big win for Ohio!”
The company disagreed with the court’s conclusion and announced its intention to appeal. Kalshi referenced a contrasting judgment from Tennessee, where a federal court recently prevented Nashville officials from enforcing state gambling statutes against the platform.
A Split in the Courts
Judge Morrison’s decision deepens an emerging judicial divide. Federal courts in Tennessee and New Jersey have issued favorable rulings for Kalshi. Meanwhile, courts in Ohio, Massachusetts, and Nevada have supported state regulatory agencies.
This growing disagreement among federal courts could eventually elevate the matter to appellate or supreme court review.
The Commodity Futures Trading Commission has entered the debate as well. CFTC Chair Michael Selig announced in February his opposition to state regulatory efforts targeting prediction markets, asserting they fall under the CFTC’s “exclusive jurisdiction.”
According to Selig, prediction markets provide ordinary Americans with financial risk management tools and function as an information verification mechanism.
Political Pushback Growing
Opposition exists among some officials. Utah Governor Spencer Cox stated in February that prediction markets “are destroying the lives of families and countless Americans” and declared they “have no place” in his state.
Kalshi competes in a market alongside platforms such as Polymarket, offering users the ability to wager on political outcomes, sporting events, and global developments.
The company initiated its lawsuit against Ohio authorities in October. The matter now proceeds to the appellate stage.
