Published:
Appeals court rules that states can regulate Kalshi’s sports prediction markets, dealing another legal blow to platforms
The 6th U.S. Circuit Court of Appeals ruled that Ohio and Tennessee may apply their gambling laws to Kalshi’s sports-related event contracts, finding the contracts are not shown to be CFTC-regulated swaps and that federal law does not preempt state gambling regulation.
A unanimous panel of the 6th U.S. Circuit Court of Appeals ruled that states can regulate Kalshi’s sports-related event contracts under their own gambling laws. The court said Kalshi had not shown that its sports-event contracts satisfy the statutory definition of a “swap” so as to fall within the CFTC’s “exclusive jurisdiction”.
The judges also held that even assuming the contracts were swaps, the Commodity Exchange Act does not expressly or impliedly preempt Ohio’s or Tennessee’s gambling rules. The decision overturns a Tennessee federal district court ruling that had sided with Kalshi and reaffirms an earlier Ohio district court decision backing the states’ approach.
The ruling adds to an ongoing split across US appeals courts. CNBC notes that the 9th Circuit last month ruled in a similar direction for Nevada, while a 3rd Circuit decision in April went against New Jersey and said the CFTC has exclusive jurisdiction over swaps regardless of contract type. CNBC also states it is widely expected the dispute could eventually reach the U.S. Supreme Court.
For FX traders, the main thing to watch is whether these legal outcomes materially change the regulatory and compliance landscape for trading-platform models in the US. That could shift perceived tail risk and uncertainty around fintech/exchange activity, which can spill into broader financial conditions even if it is not directly tied to monetary policy.
Why this matters for FX
This is mainly a legal/regulatory development rather than a macro datapoint, but it can still matter for FX through the financial-conditions channel: if court rulings drive changes in how prediction-market platforms operate, they can affect the risk and regulatory uncertainty faced by fintech and exchange-adjacent business models. That, in turn, can feed into broader risk appetite and funding conditions for US financial services-related assets—particularly those exposed to derivatives-like structures and compliance costs—though the direct FX transmission is indirect and likely limited without wider market reaction or linked changes in rates or sovereign risk.