Kalshi’s legal strategy is facing mounting resistance as federal appeals courts let states enforce gambling laws against its prediction markets. Kalshi argues that its event contracts are federally regulated “swaps” under the Commodity Exchange Act, placing them under the exclusive authority of the Commodity Futures Trading Commission and shielding them from differing state rules. But courts have repeatedly found that at least some offerings, particularly sports wagers, may count as gambling rather than swaps. The Ninth Circuit declined to reconsider its ruling allowing Nevada to block Kalshi sports bets, while the Second Circuit upheld lower-court refusals to stop New York and Connecticut from enforcing their laws. The Sixth Circuit has also ruled against Kalshi in cases involving Ohio and Tennessee.
Arkansas has now sued Kalshi, alleging that it offered gambling without required licenses, taxes, or safeguards, including by allowing users as young as 18 to wager despite a state minimum age of 21 for electronic gambling accounts. Kalshi says a nationwide federal regulator should govern its exchange instead of a patchwork of state laws. The Trump administration’s CFTC backs that position and is suing multiple states, while states argue that gambling laws still apply. Kalshi’s key exception is a Third Circuit ruling that New Jersey cannot regulate its sports contracts; New Jersey and dozens of states are asking the Supreme Court to review that decision. The conflicting rulings leave the boundary between federal commodities regulation and state gambling authority unresolved.
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