Tennessee attorney general says Kalshi is running sports betting under another name

NASHVILLE, Tenn. (WKRN) — Tennessee’s legal fight against prediction market platform Kalshi is now heading to the Sixth Circuit Court of Appeals, setting up for a growing national battle over whether sports event contracts are federally regulated financial products or simply sports betting dressed up.

The Tennessee Attorney General’s Office argues the answer is obvious.

If users are wagering on the outcome of sporting events, the state says it should fall under Tennessee’s sports gambling laws and not federal commodities regulation.

Gaming attorney and sports betting legal expert Daniel Wallach said the legal question goes far beyond whether the activity resembles gambling.

“If sporting events are what you are investing in or wagering on, that’s a straight-out sports bet,” Wallach said. “But the question in this case isn’t turning on whether it’s gambling, it’s whether the CFTC, the federal agency which oversees the commodities markets, was ever given exclusive jurisdiction to regulate sports gaming on commodities markets.”

At the center of the case is the Commodity Futures Trading Commission, the federal agency that regulates commodities markets.

Tennessee argues Congress never intended for federal swap regulations created after the 2008 financial crisis to open the door to nationwide sports wagering products.

Tennessee Attorney General Jonathan Skrmetti framed it bluntly in court filings:

“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.”

Wallach said Kalshi and the CFTC are relying on an extremely broad reading of federal commodities law.

“Congress never intended for CFTC to wield that kind of power and the premise that Kalshi and CFTC are relying on are based on the definition of what constitutes as a swap under the Commodity Exchange Act,” Wallach said. “That’s a very broad definition, which sweeps into it anything that has potential financial consequences.”

The courts, however, are no longer speaking with one voice.

A federal judge in New Jersey sided with Kalshi and allowed the contracts to continue operating there.

But in Ohio, a federal court raised serious questions about whether Congress ever clearly authorized the CFTC to regulate sports gambling products at all.

“The Ohio district court ruled the exact opposite way and said Congress did not clearly envision or authorize the CFTC to regulate sports gambling,” Wallach said.

Meanwhile, in Tennessee, a federal judge denied the state’s request for a preliminary injunction, meaning Kalshi can continue operating while appeals move forward.

The ruling did not decide the broader legal question permanently. Instead, it determined the state had not yet met the legal threshold required for emergency court intervention while the case proceeds.

And as the litigation unfolds, the industry itself keeps expanding.

“There are over 20 CFTC designated exchanges and brokers that are offering sports events contracts in all 50 states… Kalshi, crypto.com, Coinbase, Robinhood,” Wallach said. “They’re everywhere.”

What began as a dispute over one platform is quickly evolving into something larger: Whether Congress unintentionally created a federal pathway around state sports betting laws.

Legal observers said when federal courts begin reaching different conclusions on the same issue, it can increase the chances of higher appellate review and potentially eventual review by the U.S. Supreme Court.