Ohio judge rules that Kalshi is sports betting and must adhere to state law
Ohio Judge Rules Kalshi Engages in Sports Betting and Must Follow State Law
On Monday, a federal judge in Ohio determined that Kalshi’s prediction markets for sports qualify as gambling activities, necessitating compliance with state regulations. The ruling came as the company sought to challenge the state’s authority over its operations.
Kalshi, a New York-based platform that allows users to wager on outcomes ranging from politics to athletic events, had petitioned for an injunction against the Ohio Casino Control Commission. The commission argued that Kalshi functions as an “unlicensed sportsbook” and is effectively enabling bookmaking within the state.
Judge’s Ruling and Legal Reasoning
U.S. District Judge Sarah Morrison stated she was required to “avoid absurdity” in her decision. She emphasized that Kalshi’s sports offerings constitute gambling, which falls under state jurisdiction rather than federal swap regulations. “Swaps are understood as transactions involving financial instruments that directly impact commodity prices,” Morrison wrote. “Currency exchange rates, the weather, and energy costs all fall into this category, but the number of points scored in a Huskies-Bobcats game does not.”
“This conclusion is further supported by the Court’s obligation to avoid absurdity,” the judge added. “Ohio argues that defining a ‘swap’ to include sports-event contracts would lead to unreasonable outcomes. The Court agrees.”
Ohio Attorney General Dave Yost praised the decision on Tuesday, calling it a “big win for Ohio.” He criticized Kalshi’s claim that federal law preempts state regulations, stating, “These ‘prediction markets’ have exploded and look an awful lot like gambling.”
Legal Challenges and State Responses
Kalshi plans to appeal the ruling, noting a recent victory in Tennessee where a court blocked Nashville from enforcing state-level gambling rules. “We respectfully disagree with the Court’s decision, which diverges from a federal ruling in Tennessee just weeks ago, and will promptly seek an appeal,” a company spokesperson said.
Currently, sports betting is permitted in 39 states and the District of Columbia, with digital wagering available in 32 of those regions. Traditional companies like FanDuel and DraftKings have had to navigate state regulations, pay taxes, and meet licensing criteria to operate. However, prediction markets such as Kalshi and Polymarket have historically avoided similar requirements by asserting their status as commodity futures.
Despite this, states like Nevada and Massachusetts have pushed back, insisting that sports betting remains a state responsibility. These jurisdictions argue there is no federal precedent for regulating such activities, even as political differences among the states persist. Nevada, for example, leans politically conservative, while Massachusetts is a deep-blue state, and Ohio falls in the middle.
The dispute over sports betting oversight could extend for years, with prediction markets likely remaining operational for now. Kalshi maintains that its model differs from traditional sportsbooks, as users trade contracts among themselves rather than against a centralized “house” that sets odds and manages the market.
With the U.S. Supreme Court’s 2018 decision legalizing sports betting nationwide, Nevada became the only state with established regulations before that ruling. The ongoing battle now centers on whether prediction markets can continue to operate outside state oversight or if they will eventually be subject to local rules.