Kalshi prediction markets on sports constitute gambling, Ohio judge rules

A Federal Judge in Ohio has ruled that sports-related prediction markets offered by Kalshi constitute gambling and should therefore be subject to state regulatory oversight.

The decision came after the New York-based prediction market platform sought an injunction against the Ohio Casino Control Commission, which had moved to prevent the company from operating what it described as an unlicensed sportsbook within the state.

Kalshi operates a marketplace where users can place money on the outcomes of events ranging from political developments to sports results and global economic indicators. 

The company argued that its sports-event contracts should be treated as federally regulated swaps under the Commodity Exchange Act, a category typically associated with financial derivatives used in investment markets.

However, US District Judge Sarah Morrison rejected that argument, concluding that the contracts tied to sporting outcomes do not meet the legal definition of a financial swap.

Swaps, she wrote in the ruling, are generally understood as transactions involving financial instruments tied to factors that directly influence commodity prices or economic conditions. 

“Currency exchange rates, the weather and energy costs all do that: the number of points scored in the Huskies-Bobcats game does not,” Morrison stated in the Court’s opinion.

The judge also noted that the court has an obligation to avoid legal interpretations that could produce unreasonable or “absurd” outcomes. 

According to the ruling, defining sports-event contracts as financial swaps would fall into that category.

A spokesperson for Kalshi said the company plans to appeal the ruling, noting that the decision contrasts with a recent Federal Court outcome in Tennessee that blocked local authorities from forcing the platform to comply with state gambling regulations.

The platform has also attracted international partnerships, including efforts to expand its prediction market model into new jurisdictions, as XP International brings Kalshi to Brazil.