Ohio Judge rules state can enforce gambling laws against Kalshi
A federal judge in Ohio has ruled that the state can enforce its gambling laws against companies offering sports event contracts, rejecting an attempt by prediction market Kalshi to block state enforcement.
On March 9, Chief US District Judge Sarah D. Morrison denied Kalshi’s request for a preliminary injunction that would have prevented regulators from enforcing Ohio’s sports betting laws.
The verdict enables the state to continue enforcement action against companies that offer contracts that are tied to the outcome of sporting events.
This is a blow for the prediction market, which has been involved in similar disputes with other state gambling regulatory bodies. Kalshi and similar platforms, like rival Polymarket, have argued that, because they are federally regulated by the Commodity Futures Trading Commission, states should not have the power to intervene.
In her verdict, Judge Morrison mentioned the contracts these platforms offer and said she does not believe they qualify as legitimate swaps.
“[Swaps are] understood as a transaction involving financial instruments and measures that traditionally and directly affect commodity prices,” she said. “Currency exchange rates, the weather, and energy costs all do that: the number of points scored in the Huskies-Bobcats game does not.”
Federal judges in Maryland, Massachusetts, and Nevada have issued similar rulings backing state regulators in related disputes, while Tennessee last month backed Kalshi by granting them a preliminary injunction to continue operating in the state.
Charlotte Capewell brings her passion for storytelling and expertise in writing, researching, and the gambling industry to every article she writes. Her specialties include the US gambling industry, regulator legislation, igaming, and more.
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The Backstory
How the dispute landed in an Ohio courtroom
Kalshi’s clash with Ohio regulators traces back to a national test of where prediction markets fit in U.S. law. The company, which offers “event contracts” on outcomes such as sports plays, sued the Ohio Casino Control Commission and Attorney General Dave Yost last fall, arguing the state was overreaching and scaring off partners with threats of enforcement. In its complaint filed Oct. 7, Kalshi said only federally regulated derivatives oversight should apply to its business and asked a federal judge to block the state from interfering. The filing followed a cease-and-desist letter and warnings to licensed sportsbooks that any partnership with Kalshi could jeopardize their approvals. The suit detailed how months of talks with Ohio failed to close the gap between Kalshi’s view of federal preemption and the state’s stance that only licensees can take sports bets. That setup is outlined in Kalshi sues Ohio in a bid to prevent being blocked from operating.
The legal fight arrived amid broader state pushback. Ohio’s move came after Attorney General Yost and about three dozen peers argued last summer that states retain authority to police online betting. The Ohio case would become one of several testing whether Kalshi’s sports markets are financial swaps or simply wagers dressed in market clothing.
At the core: swaps or sports bets
The stakes hinge on how federal and state law classify Kalshi’s contracts. Kalshi says its markets are swaps under the Commodity Exchange Act, policed by the Commodity Futures Trading Commission, which would put them beyond state gambling laws. Several states say contracts that turn on a game’s score or a touchdown’s timing are sports bets, not swaps, and belong under their gaming regimes.
Courts have split on those definitions and on what Congress intended. In Nevada, a judge examined Kalshi’s football-linked markets and found they looked like betting products, not federally preempted instruments. That decision lifted an earlier injunction and let regulators pursue enforcement, as covered in Federal judge rules against Kalshi in Nevada. The judge said event contracts tied to sports outcomes do not fall within the CFTC’s exclusive jurisdiction. The ruling amplified pressure on Kalshi’s core thesis and emboldened state regulators that see prediction markets as unlicensed sportsbooks.
Tennessee went the other way. There, a federal judge concluded Kalshi’s sports contracts qualify as swaps because an event’s outcome is itself an occurrence that can underpin a derivatives contract. That preliminary injunction stopped state enforcement for now, as described in Tennessee judge grants Kalshi a preliminary injunction. The dueling outcomes underscore how judges are parsing the same statute differently and why Kalshi continues to seek federal forums to cement its preemption claims.
Nevada’s fast track and its ripple effects
Nevada’s case became a bellwether due to the state’s central role in gaming oversight and its insistence that prediction markets should meet the same consumer protection standards as sportsbooks. Early in that litigation, the court committed to move quickly, signaling the urgency regulators and operators placed on a clear answer. That posture was detailed in Judge commits to move quickly on Kalshi Nevada judgment. After the court later ruled against Kalshi, the company warned it faced criminal exposure and trading disruption and sought a stay pending appeal. Industry leaders in Nevada applauded the watchdogs’ stance, reinforcing the political and commercial weight behind state jurisdiction.
The Nevada trajectory also foreshadowed the cross-country tug-of-war now unfolding. As one court lifted a shield protecting Kalshi, another maintained one. The patchwork complicates operations for Kalshi and competitors and raises the odds that appellate courts, and potentially the Supreme Court, will be asked to reconcile the split.
Massachusetts tests the venue strategy
Massachusetts supplied another front. Attorney General Andrea Campbell sued Kalshi over sports markets available to Bay State customers. Kalshi tried to move the case to federal court on the theory that the Commodity Exchange Act completely preempted state law, converting the claims into federal ones. A federal judge rejected that gambit and sent the case back to Suffolk County Superior Court, finding Congress had not clearly displaced state authority in the way complete preemption requires. The ruling, described in Judge returns Kalshi vs. Massachusetts case to state court, tightens the path for prediction markets hoping federal courts will block state enforcement at the threshold.
By keeping the Massachusetts suit in state court, the decision increases the likelihood that more state statutes and consumer protection theories will be applied directly to prediction-market products. It also underscores a broader theme: even where the CFTC has oversight over certain contracts, courts are reluctant to infer that states lack room to regulate gambling-like behavior directed at their residents.
Why the outcome matters beyond one platform
The Ohio ruling slots into a national ledger that affects exchanges, sportsbooks and regulators. If sports-linked event contracts are swaps, prediction markets can expand nationwide with a single federal framework. If they are bets, each state’s licensing, tax and consumer protection rules apply. The difference determines which agencies set the guardrails, what responsible gaming controls are mandatory and how fast new products can launch.
The industry already sees downstream effects. Nevada’s stance has encouraged established casinos to press for leveled oversight, while Tennessee’s decision has given prediction markets a glimmer of regulatory certainty in at least one jurisdiction. As noted in the Nevada ruling recap, legal analysts expect the conflict to climb the appellate ladder because reasonable judges have read the same statute in opposite ways. That uncertainty chills partnerships and raises compliance costs as companies navigate a fragmented map of permissible markets.
What to watch next
Ohio’s enforcement posture now has judicial backing, which could spur more cease-and-desist activity and pressure on potential partners. Kalshi is likely to appeal adverse rulings while leaning on wins like Tennessee to keep operating where courts permit it. State attorneys general who signed onto multistate briefs may bring fresh actions that mirror Massachusetts’ approach, especially if federal courts keep declining to find complete preemption.
Meanwhile, Nevada will remain a focal point for appellate guidance given its prominence and the detailed record built around sports-linked contracts. Developments there, and in Massachusetts state court, could shape how other judges view both federal intent and practical consumer risks. However the appellate courts rule, the core question will remain the same: are these instruments financial hedges or sports bets by another name? The answer will determine who regulates the markets, how quickly they can scale and what protections consumers can expect.
