Kalshi must lock out state users after major court loss

The Sixth Circuit ruled Sept. 25 that Ohio and Tennessee can apply their gambling laws to Kalshi's sports contracts.The court rejected Kalshi's argument that complying state by state would conflict with its duties as a federally regulated exchange, and it pointed to geofencing as a workable way to satisfy both.That second appellate win for states hits the demand Eilers & Krejcik Gaming models as most exposed, the 69% of Kalshi's retail sports demand that comes from states without legal online sportsbooks.Two routes to the same resultThe unanimous panel held that Kalshi had failed to show its sports contracts meet the Commodity Exchange Act's definition of a swap, the premise behind its claim to exclusive CFTC oversight.It then added an alternative holding that even if the contracts were swaps, federal commodities law would leave Ohio and Tennessee gambling statutes in force.That second finding gives states within the circuit two separate paths to win, since a later ruling in Kalshi's favor on the swap question would leave the preemption conclusion standing.Legal questionKalshi’s positionSixth Circuit rulingPractical consequenceAre the sports contracts “swaps”?Yes, bringing them...