A federal judge in Tennessee has temporarily blocked state regulators from enforcing gambling laws against prediction market platform Kalshi, handing the company an important legal victory in its fight with state authorities.
Court sides with Kalshi — for now
Aleta A. Trauger, a U.S. District Judge, granted a preliminary injunction preventing the Tennessee Sports Wagering Council from taking enforcement action while the lawsuit moves forward.
In her ruling, Trauger indicated that Kalshi is likely to succeed in arguing that its sports-related event contracts fall under federal derivatives law — specifically the Commodity Exchange Act — rather than state gambling statutes.
Federal vs. state oversight
Kalshi operates as a federally regulated exchange under the oversight of the Commodity Futures Trading Commission (CFTC). It offers event-based contracts that allow users to trade on the outcomes of real-world events, including sports.
The company argues that its contracts qualify as “swaps” under federal law, placing them squarely within federal jurisdiction and preempting state-level gambling regulations.
Tennessee regulators had previously issued cease-and-desist letters claiming Kalshi’s sports markets amounted to unlicensed sports betting. However, the court suggested that allowing both federal derivatives regulation and state gambling enforcement could disrupt the uniform regulatory framework Congress intended.
A broader regulatory clash
The decision adds to an increasingly fragmented national landscape. In Nevada, the Nevada Gaming Control Board has filed civil enforcement action against Kalshi, alleging unlawful wagering activity.
While the Tennessee ruling is temporary, it highlights a growing jurisdictional battle between federal derivatives regulators and state gaming authorities. The final outcome could have significant implications for how sports-related prediction markets are classified and regulated across the United States.
