US court rules against Kalshi, says states can regulate prediction markets

A federal appeals court has handed a setback to prediction market operator Kalshi, ruling that individual US states retain the authority to regulate event contracts under their own gambling statutes.

The decision, issued Friday by the 6th US Circuit Court of Appeals in Cincinnati, rejected Kalshi's effort to shield its trading products from state oversight in Ohio and Tennessee. Writing for a unanimous three-judge panel, Judge Julia Smith Gibbons concluded that the two states are entitled to apply their gambling laws to the company's contracts, according to Al Jazeera.

The ruling adds another layer to an increasingly tangled legal picture over who has the power to police prediction markets, platforms that let users wager on outcomes ranging from elections to sports to broader cultural or geopolitical events. According to Al Jazeera, at least two other federal appeals courts have already weighed in on the question, and their conclusions have not lined up.

Last month, the 9th Circuit in San Francisco determined that Kalshi's event contracts fall under Nevada's gambling regulations. That came after the 3rd Circuit in Philadelphia ruled in April that the same type of contracts were not subject to New Jersey's gambling law. With the 6th Circuit now breaking in yet another direction, the splits among appellate courts raise the prospect that the US Supreme Court may eventually have to resolve the dispute, Al Jazeera reported.

Prediction markets have surged in popularity across the US in recent years, drawing users who trade on the likely outcomes of everything from presidential races to whether a nuclear agreement between the United States and Iran might materialize. That rapid expansion has fueled concern among consumer advocates and researchers, who worry about the effects of easy-access betting apps, particularly on younger users.

The regulatory fight is not confined to Kalshi. According to Al Jazeera, the state of New York filed suit on Thursday against Polymarket, another major prediction market platform, accusing it of running gambling operations without the required state license. Polymarket said it intends to defend its user base against the claims.

New York Governor Kathy Hochul criticized the company's operations in a statement, saying that running gambling activity without a license does more than break state law, and instead endangers residents of New York, including underage users considered especially vulnerable to gambling-related harm.

The outcome of the 6th Circuit case, combined with the pending New York litigation and the earlier conflicting rulings from the 9th and 3rd Circuits, signals that the legal status of prediction markets in the US remains far from settled. Companies operating in this space now face a patchwork of regional rules, with some states asserting jurisdiction over event contracts while appellate courts elsewhere have found the opposite. Industry watchers say the growing inconsistency across circuits makes it more likely that the Supreme Court will eventually be asked to provide a definitive national standard, according to Al Jazeera.

For now, Kalshi and similar platforms must contend with a fragmented enforcement landscape, in which their ability to operate without state-level gambling licenses may depend heavily on which jurisdiction a user happens to be trading from.