Kalshi's ban application was rejected, and a U.S. judge ruled that prediction markets do not take precedence over state gambling regulations

The Chief Judge of the U.S. District Court for the Southern District of Ohio, Sarah D. Morrison, ruled that there is no historical evidence indicating that Congress intended for federal law to take precedence over state regulation of sports gambling, and thus denied the preliminary injunction request filed by the prediction market platform Kalshi.

Kalshi had previously sued the Ohio Casino Control Commission in an attempt to prevent it from taking enforcement action against the platform's event contracts under state gambling laws. Last year, the regulatory agency accused Kalshi of operating illegal sports gambling in Ohio.

Kalshi argued that the event contracts it offers are derivatives regulated under the Commodity Exchange Act and should fall under the jurisdiction of the CFTC, thereby asserting that federal regulation should take precedence over state gambling laws.

However, the judge stated that there is no evidence from historical and legislative context to suggest that Congress intended for the law to supersede state sports gambling regulations, noting that when the Dodd-Frank Act amended relevant laws in 2010, sports gambling was still widely restricted in the U.S.

Kalshi announced that it would appeal the ruling. The case is seen as an important test of the legal status of prediction markets, and its outcome could affect the future compliance prospects of other prediction platforms in the U.S., including Polymarket.

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