Tennessee attorney general appeals Kalshi ruling
Tennessee Attorney General Jonathan Skrmetti has appealed a federal court ruling that temporarily blocked the state from enforcing its sports betting laws against Kalshi.
The dispute centers on whether Kalshi’s sports-event contracts should be treated as federally regulated financial products or as unlicensed sports wagering under Tennessee law.
In a filing before the US Court of Appeals for the Sixth Circuit, Skrmetti’s office argued that Kalshi’s contracts basically function as traditional sports gambling that sportsbooks offer. Tennessee regulators maintain that the company should comply with state licensing rules, consumer protections, and age restrictions that apply to legal sportsbooks.
In his statement, Skrmetti said, “Kalshi can call their bets ‘swaps’ all they want, but everyone who so much as glances at the platform understands that this is sports gambling.”
Kalshi, however, says its markets fall under the Commodity Futures Trading Commission’s authority because the contracts are listed on a federally approved derivatives exchange.
This year, a federal judge sided with the prediction platform and granted an injunction preventing Tennessee officials from taking any action against the operator while the case is ongoing.
Tennessee’s appeal is asking the Court of Appeals whether it can enforce its sports gambling laws, as the battle between state regulators and prediction market platforms continues across the country.
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
A federal-state collision over sports contracts
Tennessee’s appeal against Kalshi sits at the center of a widening fight over who controls sports-linked prediction markets: federal commodities regulators or state gambling authorities. The immediate question before the 6th U.S. Circuit Court of Appeals is narrow: whether Tennessee can enforce its sports betting laws against Kalshi while litigation continues. The broader stakes are national, because a ruling could shape how far states can go in treating event contracts as sports wagers when they are offered by a federally regulated exchange.
Kalshi argues its contracts are financial products overseen by the Commodity Futures Trading Commission. State officials counter that sports contracts tied to moneylines, point spreads and totals look and function like sportsbook bets, regardless of the label attached to them. Tennessee Attorney General Jonathan Skrmetti has framed the dispute in those terms, arguing the platform is using federal derivatives law to avoid the licensing, age limits, consumer safeguards and tax obligations imposed on legal sportsbooks.
The appeal follows a temporary win for Kalshi in federal court, where a judge blocked Tennessee from taking enforcement action while the case proceeds. That injunction did not resolve the merits. It instead intensified a legal contest already playing out across multiple states as attorneys general and gaming regulators test whether existing gambling laws can reach a new class of sports markets built around yes-or-no contracts.
Tennessee’s broader enforcement posture
Tennessee’s action against Kalshi did not emerge in isolation. Skrmetti’s office has taken an increasingly aggressive stance toward online products it says mimic regulated gambling while operating outside the state’s oversight system. That posture was visible when the attorney general issued cease-and-desist orders to nearly 40 sweepstakes casino operators, alleging they offered unregulated gambling under a model built on dual virtual currencies and prize redemption.
That sweepstakes crackdown is relevant because it reflects the state’s core concern in the Kalshi dispute: form should not override function. Tennessee officials argued that sweepstakes operators used a promotional structure to disguise real-money gambling. In the Kalshi case, the argument is similar, though the legal framework is different. The state says the company’s sports contracts may be listed as event derivatives, but for consumers they operate like sports wagers.
That enforcement theory could matter on appeal. Tennessee is not merely asking whether Kalshi is federally regulated. It is asking whether federal regulation of an exchange displaces state gambling laws when the underlying product is tied to sports outcomes. If courts accept Kalshi’s position, states could face limits in policing platforms that offer sports markets without local sportsbook licenses. If Tennessee prevails, prediction market operators may need to adapt state by state, much like online sportsbooks.
Other states press the same argument
The Tennessee case is part of a coordinated-looking, though state-driven, wave of litigation. In Massachusetts, Attorney General Andrea Joy Campbell sued Kalshi over alleged illegal sports wagering, saying its contracts allow users to place yes-or-no bets on sporting events while bypassing licensing rules enforced by the Massachusetts Gaming Commission. The state’s complaint, filed in Suffolk Superior Court, said Kalshi offered products resembling moneyline, spread and over-under bets without applying for a sports wagering license.
Massachusetts also emphasized public health and consumer protection. Campbell argued that sports betting carries risks of addiction and financial loss, and that operators must follow state rules designed to mitigate those harms. The state pointed to Kalshi’s access for users ages 18 to 20, below Massachusetts’ legal online sports betting age of 21, and alleged gaps in safeguards such as deposit controls and risk disclosures. The Massachusetts complaint is available through the state’s published filing at mass.gov.
Michigan has advanced a comparable theory. Attorney General Dana Nessel filed suit seeking to block Kalshi, arguing the platform is effectively an online sportsbook operating without licenses required under the Lawful Sports Betting Act. Michigan’s position turns partly on market access: only licensed commercial casinos and federally recognized tribal casinos can obtain sports betting licenses through the Michigan Gaming Control Board. The state’s complaint, published at michigan.gov, seeks a declaration that Kalshi is a sports betting operator and a permanent injunction.
Exclusive state models raise the stakes
The legal pressure is especially acute in states with tightly controlled gambling systems. Washington Attorney General Nick Brown sued Kalshi in King County Superior Court, alleging the company violated a state framework that bans most gambling outside sports betting conducted on tribal lands. The complaint said Kalshi allowed Washington users to wager on sports, elections and other real-world events, and claimed more than 90% of platform activity was tied to sports-related contracts.
Washington’s case shows why state officials view prediction markets as more than a licensing technicality. In states where sports betting rights are tied to tribal compacts or a single authorized channel, an unlicensed prediction market can threaten both regulatory control and negotiated economic arrangements. If sports contracts are treated as federally protected financial products, they may bypass the systems states built after the Supreme Court opened the door to legal sports betting in 2018.
Rhode Island presents a similar pressure point. Attorney General Peter Neronha sued Kalshi and Polymarket, arguing their sports-event contracts violate state law because sports wagering is permitted only through the state-authorized Sportsbook RI platform. That case followed Kalshi’s own federal lawsuit seeking to stop Rhode Island from restricting its operations. The sequence illustrates an emerging litigation pattern: states investigate or threaten enforcement, and prediction platforms seek federal protection by invoking CFTC oversight.
The unresolved preemption question
At the heart of the litigation is preemption, though each case arrives through different state laws and procedural postures. Kalshi’s defense depends on the premise that CFTC-regulated event contracts are not subject to state-by-state gambling regulation. States argue that federal derivatives oversight was not meant to create a national loophole for sports betting, especially when the products are marketed to retail users and mirror wagers already regulated under state law.
The CFTC’s role complicates the fight. Prediction markets may list contracts through federally regulated infrastructure, but sports betting has traditionally been controlled by states. That division was manageable when event contracts focused on elections, economic indicators or policy outcomes. It became more volatile as platforms expanded into sports, where states have detailed laws covering licensing, tax collection, responsible gambling, advertising, data integrity and age verification.
For Tennessee, the appeal is therefore about preserving its ability to enforce a comprehensive sports betting regime. For Kalshi, the case is about protecting a federal market structure from inconsistent state prohibitions. The outcome could influence whether prediction markets continue offering sports contracts nationwide under one federal umbrella or are forced into a patchwork of state approvals, restrictions and lawsuits.
What the appeal could signal
The 6th Circuit does not need to settle every question surrounding prediction markets to affect the national landscape. Even a ruling on the injunction could shift leverage. If Tennessee can enforce its laws while the case continues, Kalshi may face greater pressure to suspend or limit sports contracts in contested states. If the injunction stands, other platforms may treat it as support for continued expansion while litigation proceeds elsewhere.
The cases in Massachusetts, Michigan, Washington and Rhode Island show that state officials are converging on a shared message: sports-linked event contracts should be regulated like sports betting when they serve the same consumer purpose. Kalshi and similar platforms are pressing the opposite view, that federally regulated markets cannot be reclassified by states simply because the underlying event is a game.
That conflict leaves courts to draw a line between financial speculation and gambling. Tennessee’s appeal is one of the first major tests of where that line will fall for sports prediction markets, and whether state gambling laws can keep pace with products designed to sit just outside traditional sportsbook categories.
