Another federal appeals court has ruled that states can enforce their gambling laws against the prediction market Kalshi, which asserts that it can only be regulated by the US government. On Friday, a three-judge panel in the US Court of Appeals for the Sixth Circuit ruled unanimously against Kalshi and in favor of Ohio and Tennessee. While the US Commodity Futures Trading Commission has exclusive jurisdiction over “swaps,” the judges found that sports wagers offered on Kalshi do not meet the legal definition of swaps.

The ruling said Kalshi has not shown that its sports-event contracts satisfy the statutory definition of a 'swap' so as to fall within the scope of the CFTC's exclusive jurisdiction. It also said that even if Kalshi’s sports-event contracts were swaps, the Commodity Exchange Act neither expressly nor impliedly preempts Ohio’s or Tennessee’s gambling laws.

The appeals court ruling upheld an Ohio district court decision against Kalshi and vacated a Tennessee district court order that went in favor of Kalshi. Many states are trying to stop or restrict gambling on Kalshi, which offers sports betting despite not obtaining state gambling licenses or paying state gambling taxes. The Sixth Circuit was the third federal appeals court to rule on this issue, with states now having two major wins to Kalshi’s one. New Jersey recently asked the Supreme Court to settle the matter for the whole country. The court decided that Kalshi’s sports-event contracts are not swaps because they have only downstream economic consequences.