US Appeals Court Rules States Hold Authority to Regulate Prediction Markets in Blow to Kalshi

A laptop screen displays trades on the Kalshi website on April 16, 2026 [Jenny Kane/AP]. A United States appeals court has ruled against Kalshi's effort to exempt event contracts from state gambling laws, determining that states maintain the authority to regulate prediction markets.

Delivered on Friday by the 6th US Circuit Court of Appeals in Cincinnati, the decision contributes to an ongoing debate concerning the oversight of prediction markets amid their rapid expansion, which has sparked both ethical and regulatory inquiries.

This ruling further widens a split among federal appeals courts regarding the jurisdictional powers of state and federal regulators over these markets, potentially setting the stage for the US Supreme Court to resolve the conflict. Previously, the 9th Circuit in San Francisco concluded last month that Kalshi’s event contracts fall under Nevada’s gambling laws, whereas the 3rd Circuit in Philadelphia determined in April that the company's contracts are exempt from New Jersey’s regulations.

Writing for a unanimous three-judge panel in Friday's case, Judge Julia Smith Gibbons affirmed that Ohio and Tennessee possess the right to oversee event contracts through their respective gambling frameworks.

With prediction markets surging in popularity throughout the US, participants currently wager on a wide array of outcomes, ranging from sporting events and presidential elections to cultural shifts and potential nuclear agreements between the US and Iran. Meanwhile, industry experts have voiced worries over the widespread availability of these betting platforms and apps, particularly regarding their impact on youth.

Adding to the regulatory crackdown, the state of New York initiated a lawsuit on Thursday against the prediction market Polymarket, accusing the platform of running an illegal gambling business. In response, Polymarket announced plans to vigorously defend its user base.

“By running an unlicensed gambling operation, Polymarket has done more than just knowingly violate state law, they have put New Yorkers at risk, especially those underage who are most vulnerable to problem gaming,” Governor Kathy Hochul stated.