Court of Appeals Rules Against Prediction Market Site

In a win for horse racing interests, the United States Sixth Circuit Court of Appeals ruled that prediction market platform Kalshi is operating in violation of two bodies of law by taking bets on sporting events. The court's opinion, released Sept. 25, deals with cases arising out of Ohio and Tennessee where state authorities argued their gambling laws were being broken by Kalshi. While the facts in the lower courts did not involve wagering on horse racing events, Kalshi and other companies like it compete nationally with horse racing for gambling dollars. Kalshi takes the position that its business consists of "swaps" and that its regulation is preempted within the sole jurisdiction of the federal Commodity Futures Trading Commission. The appellate court disagreed on both counts. "We hold that 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.' "And even assuming that Kalshi’s sports-event contracts are swaps, we alternatively hold that the (Commodities Exchange Act) neither expressly nor impliedly preempts Ohio’s or Tennessee’s gambling laws," wrote Judge Julie Smith Gibbons. Kentucky lies within the jurisdiction of the Sixth Circuit, as does Michigan. Kalshi has lost a similar case in the Ninth Circuit Court of Appeals and won in the Third Circuit Court of Appeals. READ: Kentucky Goes on Offense Against Prediction Markets The U.S. Supreme Court appears destined to resolve issues involving prediction markets as these and other cases wind through the courts.