US court rules against Kalshi, says states can regulate prediction markets

By Al Jazeera Staff, Reuters and The Associated Press. Published On 25 Sep 202625 Sep 2026.

Key points

• In Friday's ruling, Judge Julia Smith Gibbons wrote for the unanimous three-judge panel that Ohio and Tennessee can regulate event contracts under their gambling laws.
• The state of New York filed a lawsuit against the prediction market Polymarket on Thursday, arguing that it is operating as an unlicensed gambling operation.
• Two other federal appeals courts have previously addressed questions of whether prediction markets are subject to state gambling laws.
• Experts have triggered concern regarding the proliferation of prediction markets and betting apps, especially for young residents.
• Prediction markets have become increasingly popular in the US.

Meanwhile, a United States appeals court has discovered that states can regulate prediction markets, ruling against a bid by the business Kalshi to exempt so-called event contracts from state gambling laws.

Meanwhile, the Friday ruling by the 6th US Circuit Court of Appeals in Cincinnati is the latest in an unfolding debate regarding oversight of prediction markets, whose explosive expansion has prompted ethical and regulatory questions.

Notably, the decision additionally deepens a divide among federal appeals courts regarding the authority of state and federal regulators to regulate such markets, opening up the possibility that the US Supreme Court could weigh in on the matter.

Two other federal appeals courts have previously addressed questions of whether prediction markets are subject to state gambling laws. While the 3rd Circuit in Philadelphia remarked in April that Kalshi's contracts are not subject to New Jersey's, the 9th Circuit in San Francisco ruled last month that Kalshi's event contracts are subject to Nevada's gambling laws.

Prediction markets have become increasingly popular in the US. They allow users to place bets on everything from sporting events and presidential elections to cultural developments and the prospects of a accord between the US and Iran on the latter's nuclear programme.

In practice, the state of New York filed a lawsuit against the prediction market Polymarket on Thursday, arguing that it is operating as an unlicensed gambling operation. The firm responded by stating that it would "fight for its users".

"By running an unlicensed gambling operation, Polymarket has done more than just knowingly violate state law, they have put New Yorkers at risk, especially those underage who are most vulnerable to problem gaming, " Governor Kathy Hochul remarked in an official note.

In short, US court rules against Kalshi, says states can regulate prediction markets is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.