Federal court rules Kalshi is subject to Tennessee’s gambling laws for sports contracts

​A federal appeals court ruled that prediction market Kalshi’s sports-event contracts are subject to Tennessee’s sports-wagering laws, reversing a lower-court ruling.

​A three-judge panel of the U.S. Court of Appeals for the 6th Circuit ruled that sports event contracts on prediction market websites like Kalshi and Polymarket are essentially the same as placing a legal sports bet.

​Kalshi started offering sports event contracts in Tennessee in 2025 without registering with the state’s sports wagering council, under the legal theory that the company’s contracts are “swaps,” similar to commodity trading, which falls exclusively under the jurisdiction of the U.S. Commodity Futures Trading Commission.

​This allowed Kalshi also to avoid paying Tennessee’s sports wagering taxes and licensing fees.

​Senior Circuit Judge Julia Gibbons said in her ruling that sports-event contracts don’t meet the definition of a contract swap, which people and companies traditionally use to mitigate financial risk.

​“Unlike contracts based on financial values or instruments (e.g., interest rates or stock prices), Kalshi’s sports-event contracts have only downstream economic consequences, assuming they have the potential to cause economic consequences at all,” Gibbons wrote in her ruling. “Thus, they are not ‘associated’ with potential financial, economic, or commercial consequences, even if they may eventually lead to some down the line.”

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​Kalshi is a prediction market that lets people bet on outcomes ranging from election winners to cryptocurrency prices on specific dates to winners of sporting events, like NFL games.

​Prediction markets emerged as a way to potentially better determine outcomes, based on the concept of the wisdom of crowds. Having people put money behind future results meant they were more likely to make an informed decision because they had something valuable at stake.

​Critics of the markets call them just another way to give people more gambling options. Unlike sportsbooks, Kalshi doesn’t make money based on whether something wins or loses, but serves as a market maker, taking a cut of the total amount bet.

​Around 90% of the bets made on Kalshi are sports bets, according to the Financial Times.

​Tennessee legalized sports betting in 2019, allowing companies to start offering the product the next year. The state has no limit on the number of licenses it offers, but requires companies to pay a license fee and tax based on the amount wagered.

The state’s sports wagering council tried to force Kalshi to register, and when it refused, sued it for illegal sports betting.

​A federal district judge initially blocked Tennessee from enforcing its sports gambling laws against the company, and the state appealed to the 6th Circuit Court of Appeals.

​The appeals court ruling is narrowly tailored to sports betting, allowing Kalshi to operate its other event contracts in Tennessee.