Ohio Court Blocks Kalshi Injunction and Keeps State Gambling Rules in Place

Key Points

• An Ohio federal judge refused Kalshi’s request for a preliminary injunction and allowed the state to enforce sports gambling laws against the prediction market platform.
• The ruling rejected Kalshi’s claim that its sports event contracts count as swaps governed under federal derivatives law.
• Conflicting court rulings inside the Sixth Circuit raise the chance that appellate courts will decide the legal position of prediction markets.

A federal judge in Ohio rejected a request from prediction market platform Kalshi for a preliminary injunction against state regulators while the legal fight continues. Chief Judge Sarah D. Morrison from the US District Court for the Southern District of Ohio ruled that Kalshi failed to prove it deserved a preliminary injunction. The Ohio Casino Control Commission accused the New York company of acting as an unlicensed sportsbook through contracts tied to event outcomes. Users on the platform trade contracts linked to real-world results including sports outcomes, and critics say the structure mirrors standard betting markets. The conflict focuses on whether prediction markets operate under federal derivatives regulation or under sports betting laws enforced by individual states. Ohio regulators argued that contracts connected to sports results represent illegal wagering according to state gambling legislation.

Kalshi urged the court to block the state from treating its sports contracts as gambling while the bigger legal battle rolls on. They argued hard that these products behave like financial instruments protected by federal law instead of wagers left to state officials. The firm made clear its event contracts live under the Commodity Exchange Act, which the Commodity Futures Trading Commission oversees for derivatives. Contracts built on actual events should count as swaps, just like financial tools connected to weather data or power prices, Kalshi said. Federal derivatives rules would then take priority over some state gambling restrictions and open the door for prediction markets everywhere. A national framework would finally replace the chaos of facing separate betting rules across dozens of states.

Judge Morrison rejected the argument that federal commodities regulation overrides state authority over gambling activity.

Court Rules Kalshi Sports Event Contracts Do Not Qualify as Financial Swaps

She wrote that historical evidence shows no sign that Congress planned to replace state sports gambling laws with federal derivatives regulation. Her opinion referred to the period when the Dodd-Frank Act amended the Commodity Exchange Act in 2010. That legislation created federal oversight for swaps but did not signal any plan to bypass sports gambling restrictions. The judge also examined the era when the Professional and Amateur Sports Protection Act limited sports betting across many states. The court concluded that Kalshi sports event contracts probably fall outside the legal definition of swaps under derivatives law. Judge Morrison explained that swaps normally involve financial variables that influence the pricing of commodities currency values or weather data. She noted that the number of points scored during a sports match does not affect commodity pricing in markets.

The opinion warned that expanding the swap definition to cover sports contracts would lead to results that lack logic. Her decision stated that Kalshi’s interpretation stretched the statutory language beyond the intended purpose of the law. The ruling also addressed concerns raised by thirty tribal gaming organisations that supported the state through an amicus brief. These groups warned that classifying sports event contracts as swaps could disrupt tribal authority over gaming operations. Judge Morrison wrote that treating sports contracts as swaps could create a major impact on tribal control of gaming activities. Ohio Attorney General Dave Yost supported the decision and stated that prediction markets such as Kalshi resemble gambling. Regulators repeated their position that event contract platforms function like sportsbooks even when companies describe them as financial tools.

Cease and Desist Orders Triggered the Case

This ruling forms part of a wider legal dispute between Kalshi and gaming regulators across several US states. The conflict started in April 2025 when the Ohio Casino Control Commission issued cease and desist letters to several platforms. Those letters targeted Kalshi Robinhood and Crypto.com for offering sports event contracts without gambling licences. Kalshi filed a lawsuit in October against the commission and the attorney general’s office. The company argued that federal law should override the Ohio attempt to regulate contracts listed on federally approved exchanges. The Ohio decision appeared shortly after a federal court in Tennessee produced a different outcome in another Kalshi dispute. That court granted Kalshi a preliminary injunction against Tennessee regulators in the related case. Judge Aleta A Trauger from the US District Court for the Middle District of Tennessee ruled that an outcome may count as an event under the statute.

Both district courts operate under the jurisdiction of the US Court of Appeals for the Sixth Circuit. Different conclusions inside the same circuit create what lawyers describe as a split within the court system. When district courts reach opposing rulings on one legal issue, interpretation of the law may vary across locations. Such conditions often lead appellate courts to step in and establish a single interpretation of the law. The Ohio decision increases the chance that the Sixth Circuit will eventually rule on the status of sports event contracts. Appeal courts may also attempt to reconcile conflicting interpretations coming from federal district courts. Kalshi confirmed plans to appeal the Ohio decision. A company spokesperson said the firm disagrees with the ruling and will pursue an appeal.

The spokesperson also said the decision differs from the recent ruling delivered by the Tennessee court. Federal courts in Maryland and Nevada and state courts in Massachusetts previously ruled against Kalshi. A federal court in New Jersey granted the company a preliminary injunction in April 2025. Other related cases continue in courts located in New York and Connecticut.

Wider Impact for the Prediction Market Industry

Since last year the company has faced lawsuits in several federal courts filed by regulators tribal authorities and private plaintiffs. Each case questions whether contracts tied to real-world results belong inside derivatives regulation or state gambling systems. Platforms that offer contracts linked to sports outcomes will likely face further challenges from state regulators. Regulators argue that such products fall within existing gambling frameworks. Kalshi claims prediction markets help investors businesses and policymakers forecast outcomes and manage risk. The company also argues that classifying prediction markets as gambling restricts financial innovation and limits event-based derivatives. The debate now extends beyond Kalshi because other platforms operate with similar contract structures. Competitors include crypto prediction markets such as Polymarket that provide liquidity and new technology but lack consumer protection.

Several jurisdictions also ban those platforms. Other services such as PredictIt and betting exchanges including Smartkets operate inside the same sector. Earlier platforms including Intrade and PredictIt used similar arguments when defending their products during regulatory scrutiny. Regulators frequently classified those markets as gambling which created fragmented legal disputes between different states. Outside the United States prediction markets attract users in parts of Europe and Asia. Some operators present them as financial technology rather than gambling services. Many European regulators still classify them as gambling due to concerns about consumer protection. Malta adopted financial and gaming rules that attract operators seeking regulatory legitimacy. Across Europe authorities apply different classifications to prediction markets.

Some countries treat them as gambling while others recognise them as derivatives. In Asia prediction markets continue expanding but regulation varies across jurisdictions. Even with restrictions users in the region form a fast-growing group interested in political economic and sports predictions. Breakthroughs in AI-driven forecasts and modern fintech keep pushing authorities around the world. Regulators still wrestle with the question of financial rules versus gambling controls for these platforms. Appeals roll on, judgments conflict openly, and higher courts could soon take up the fight. The road might lead straight to a decisive ruling from the United States Supreme Court.