A United States appeals court has determined that states have the authority to regulate prediction markets, ruling against a request by the company Kalshi to exempt event contracts from state gambling laws. This ruling was issued on September 25, 2026, by the 6th US Circuit Court of Appeals in Cincinnati, contributing to an ongoing debate about the oversight of prediction markets, which have seen significant growth and raised ethical and regulatory concerns.
The decision adds to a split among federal appeals courts regarding the jurisdiction of state and federal regulators over prediction markets, potentially paving the way for the US Supreme Court to address the issue. Previously, the 9th Circuit in San Francisco ruled that Kalshi’s event contracts are subject to Nevada’s gambling laws, while the 3rd Circuit in Philadelphia concluded that Kalshi’s contracts are not subject to New Jersey’s laws.
In the recent ruling, Judge Julia Smith Gibbons, writing for the unanimous three-judge panel, stated that Ohio and Tennessee can regulate event contracts under their respective gambling laws.
Prediction markets have gained popularity in the US, allowing users to place bets on a variety of events, including sports, elections, and international negotiations. However, experts have expressed concerns regarding the rise of prediction markets and betting applications, particularly their impact on young people.
Additionally, the state of New York has filed a lawsuit against the prediction market Polymarket, claiming it operates as an unlicensed gambling operation. In response, Polymarket stated it would defend its position. New York Governor Kathy Hochul remarked that Polymarket's actions have violated state law and pose risks to vulnerable populations, particularly minors susceptible to gambling problems.