A panel of judges on the Sixth Circuit Court of Appeals ruled Friday that prediction market provider Kalshi's sports-related events contracts are not swaps, and therefore are subject to state gaming regulations rather than the federal Commodity Futures Trading Commission's rules.

It's the latest appeals court to weigh in on the ongoing legal fight between states and prediction market providers, and the ruling creates further reason for the U.S. Supreme Court to ultimately weigh in on the matter.

Friday's ruling addresses two cases brought by Kalshi against regulators in Ohio and Tennessee. The platform wanted to secure injunctions blocking the states from suing it, and while an Ohio federal court denied Kalshi's motion, a Tennessee federal court granted it.

States have tried to wrangle prediction markets offering sports-related contracts under their regulatory frameworks since they started taking off after the 2024 election, arguing that these markets are competing with state gambling platforms and offering identical products to gambling sites and apps. For many states, the issue is that federally regulated platforms do not pay state taxes, while still competing with state-regulated platforms. Another major point of contention is the fact that prediction markets often offer their products to people as young as 18, rather than 21, like most state gambling operators.

In Friday's ruling, the three-judge panel said it agreed that Kalshi did have the right to bring a case, but disagreed that the products in question were federally regulated swaps.

"While we agree with Kalshi that its sports-event contracts are conditioned on the occurrence of 'event[s],' we conclude that Kalshi’s contracts do not depend on events that are 'associated with a potential financial, economic, or commercial consequence' within the meaning of the statute," the ruling said.

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