Ohio Judge Rules Kalshi Sports Contracts Are Gambling, Not Swaps

U.S. District Judge Sarah Morrison handed Ohio Attorney General Dave Yost a significant legal victory, ruling that Kalshi’s sports-based prediction contracts are gambling products subject to Ohio sports betting law, not financial swaps protected by federal regulation. The decision creates a direct circuit split with a Tennessee federal court that ruled in Kalshi’s favor on nearly identical grounds, pushing the company’s legal battle across multiple states simultaneously. Kalshi, which operates a CFTC-regulated prediction market platform, has announced it will appeal the Ohio ruling.

Ohio Court Rejects Kalshi’s Federal Preemption Argument on Sports Contracts

Judge Morrison’s Core Legal Reasoning

Judge Sarah Morrison’s ruling centers on a precise legal distinction that separates sports event contracts from other prediction market products. She acknowledged that contracts tied to commodities such as weather patterns, energy prices, or economic indicators qualify as swaps under the Commodity Exchange Act and therefore fall under exclusive CFTC oversight. Sports scores, however, do not meet that commodity definition, and Morrison concluded that Kalshi’s sports contracts therefore lack federal preemption protection.

This distinction matters enormously. Kalshi had argued that all its contracts, including those tied to sports outcomes, are federally regulated swaps and that Ohio had no authority to enforce its sports betting licensing requirements against the platform. Morrison rejected that argument entirely, finding that the federal swap framework does not extend to contracts whose underlying reference is a sporting event result.

The ruling effectively creates two legal categories for Kalshi’s products: federally protected contracts on economic events, and state-regulated gambling contracts on sports outcomes. That split within Kalshi’s own product line complicates the company’s broader legal strategy and its pitch to regulators that prediction markets operate entirely outside traditional gambling law.

Ohio AG Dave Yost Calls It a Win for State Authority

Ohio Attorney General Dave Yost publicly praised the ruling as a meaningful affirmation of state sovereignty over gambling regulation. Yost has been among the most aggressive state officials in challenging Kalshi’s expansion, arguing that allowing a federally chartered platform to offer sports prediction contracts without a state sports betting license undermines Ohio’s regulatory framework, which voters approved through Issue 2 in November 2023. Ohio’s legal sports betting market launched on January 1, 2023, and generated over $9.4 billion in total handle during its first full year of operation, according to the Ohio Casino Control Commission.

The attorney general’s office framed the ruling as protection for licensed Ohio sportsbooks that pay state fees, comply with responsible gambling mandates, and operate under strict consumer protection rules. Kalshi, by contrast, operates under CFTC oversight and does not hold an Ohio sports betting license. That asymmetry was central to Yost’s legal challenge from the start.

The Tennessee Split Creates a Nationwide Legal Crisis for Kalshi in 2025

How the Tennessee Ruling Differs and Why It Matters

A federal court in Tennessee reached the opposite conclusion in a ruling that preceded the Ohio decision, finding that Kalshi’s sports contracts do qualify as federally regulated instruments and that Tennessee’s attempt to block the platform was preempted by federal law. That ruling gave Kalshi a significant legal foothold and formed the backbone of its argument in Ohio. Judge Morrison’s refusal to follow the Tennessee reasoning now creates a genuine circuit-level conflict that may ultimately require resolution by a federal appeals court or the U.S. Supreme Court.

Legal analysts tracking the prediction market sector note that the Tennessee and Ohio decisions apply the same federal statute, the Commodity Exchange Act, to nearly identical facts and reach opposite conclusions. That kind of direct conflict between federal district courts in different states is precisely the type of split that appellate courts prioritize for review. Kalshi’s appeal of the Ohio ruling will likely argue that Morrison misapplied the commodity definition and that the Tennessee court’s analysis is the correct one [1].

The stakes extend well beyond Kalshi itself. A final appellate ruling on whether sports prediction contracts are swaps or gambling products will define the entire prediction market industry’s legal status in the United States for years to come.

Massachusetts, Nevada, and Michigan Add Regulatory Pressure

Ohio is not the only state pushing back against Kalshi. Regulators in Massachusetts, Nevada, and Michigan have each initiated scrutiny of the platform’s sports-related offerings, according to reporting by GamblingNews.com [2]. Nevada’s Gaming Control Board, which oversees one of the most mature sports betting markets in the country, has been particularly attentive to whether prediction market platforms require state licensing. Michigan’s Gaming Control Board and the Massachusetts Gaming Commission have similarly signaled that they view sports outcome contracts as gambling products regardless of how the CFTC classifies them.

This multi-state regulatory pressure means Kalshi faces simultaneous legal battles across at least five jurisdictions while trying to scale its platform and attract institutional and retail users. Each adverse state ruling adds ammunition to the argument that Kalshi’s sports contracts fall outside federal preemption, potentially influencing how appellate courts weigh the evidence.

Prediction Markets vs. Sports Betting: The Regulatory Divide Since 2023

Kalshi launched in 2021 after receiving CFTC approval to operate as a designated contract market, a status that gave it the legal foundation to offer binary prediction contracts on a range of events. The CFTC approved Kalshi’s election contracts in September 2024 after a federal court ordered the regulator to reconsider its earlier rejection, a decision that energized the prediction market sector and drew millions of new users ahead of the November 2024 U.S. presidential election [3].

The rapid growth of prediction markets in 2024 and 2025 put Kalshi and competitors like Polymarket directly in the crosshairs of state gambling regulators. Traditional sportsbooks, which pay licensing fees that can reach into the millions of dollars per state and comply with detailed consumer protection requirements, have lobbied aggressively against what they characterize as an unlicensed competitor operating in the same market. The American Gaming Association, which represents licensed casino and sportsbook operators, has publicly supported state efforts to require prediction market platforms to obtain gambling licenses.

The core legal question, whether the CFTC’s designation of a contract as a swap preempts state gambling law, has no clean precedent. The Commodity Exchange Act contains a broad preemption clause, but courts have historically applied it to financial instruments with genuine commodity exposure, not to contracts whose payoff depends entirely on a sporting event’s outcome. Judge Morrison’s ruling leans heavily on that distinction, and it represents the most detailed judicial analysis of the question to date from the anti-Kalshi side of the debate.

What the Kalshi Ruling Means for Online Casino and Sports Betting Players

For players who use regulated online sportsbooks and fast payout casino platforms, the Kalshi ruling reinforces why licensing and regulatory compliance matter. Licensed operators in states like Ohio go through rigorous vetting, pay state fees that fund problem gambling programs, and operate under consumer protection rules that cover dispute resolution, data security, and responsible gambling tools. The legal fight over Kalshi is, at its core, a fight over whether those standards apply equally to all platforms offering sports outcome products.

If appellate courts ultimately side with Ohio and rule that sports prediction contracts are gambling products, states will gain the authority to require platforms like Kalshi to obtain sports betting licenses, meet the same consumer protection standards as traditional sportsbooks, and contribute to state gambling revenue funds. That outcome would level the competitive playing field and potentially push prediction market platforms to formalize their operations within existing state licensing frameworks, which could benefit players through stronger regulatory protections.

Key Takeaways

• U.S. District Judge Sarah Morrison in Ohio ruled in 2025 that Kalshi’s sports event contracts constitute gambling under Ohio law, not federally regulated swaps under the Commodity Exchange Act.
• The Ohio ruling directly contradicts a Tennessee federal court decision that found Kalshi’s sports contracts are federally protected swaps, creating a circuit split that may reach an appellate court.
• Ohio AG Dave Yost praised the ruling as a win for state authority over sports betting regulation, citing Ohio’s legal market which processed over $9.4 billion in handle in its first full year.
• Kalshi has announced it will appeal the Ohio decision and simultaneously faces regulatory scrutiny in Massachusetts, Nevada, and Michigan.
• Judge Morrison drew a legal line between commodity-based contracts, such as weather and energy, which are swaps, and sports score contracts, which she ruled are not.
• The CFTC approved Kalshi’s election contracts in September 2024 after a federal court order, a decision that accelerated the prediction market sector’s growth and intensified state regulatory responses.
• Licensed sportsbook operators, represented by groups like the American Gaming Association, have actively supported state efforts to subject prediction market platforms to standard gambling licensing requirements.

Frequently Asked Questions

The Bottom Line

Judge Sarah Morrison’s Ohio ruling does not end the Kalshi legal saga, but it significantly raises the stakes. With one federal court in Tennessee ruling for Kalshi and one in Ohio ruling against it, the question of whether sports prediction contracts are gambling or federally regulated financial instruments now demands appellate resolution. Every state regulator watching this case, and there are many, will calibrate their own enforcement posture based on how that appeal unfolds.

For the broader prediction market industry, the Ohio decision is a warning that CFTC designation alone does not guarantee immunity from state gambling law when the underlying contract references a sports score. Kalshi built its business on the argument that its federal status places it above state gambling regulation. That argument now has a direct judicial rejection on the record, and the company must defend its position in multiple states simultaneously while managing an active appeal.

The line between financial markets and sports betting has never been thinner, and the courts are now the ones drawing it.

Sources

1. Covers.com – Reporting on the Ohio federal court ruling against Kalshi and the Tennessee circuit split
2. GamblingNews.com – Coverage of multi-state regulatory scrutiny of Kalshi in Massachusetts, Nevada, and Michigan
3. GamblingNews.com – Background on CFTC approval of Kalshi election contracts in September 2024 and prediction market growth