A federal judge in Tennessee has granted a preliminary injunction preventing state officials from enforcing local sports betting laws against Kalshi and its sports related event contracts.
In a ruling issued Thursday, U.S. District Judge Aleta A. Trauger concluded that Kalshi is likely to succeed in arguing its contracts qualify as “swaps” under the Commodity Exchange Act. If upheld, that interpretation would place the contracts under exclusive federal oversight and potentially preempt state-level gambling regulations.
The injunction blocks individual Tennessee officials from pursuing enforcement under the Tennessee Sports Gaming Act while the litigation proceeds.
Commodity Exchange Act at Center of Legal Dispute
Kalshi operates as a platform regulated by the Commodity Futures Trading Commission, offering binary contracts tied to real-world outcomes, including sports results. Tennessee regulators had issued a cease-and-desist letter, alleging the contracts amounted to unlicensed sports wagering.
Andrew Kim, commenting on the decision on X;
A key issue before the court was whether contracts based on the “outcome” of a sports game satisfy the statutory requirement of being tied to the “occurrence” of an event. Judge Trauger wrote that an outcome can itself constitute an occurrence. She also accepted arguments that sports results carry downstream economic consequences, satisfying the Act’s requirement that swaps relate to financial or economic impacts.
Growing National Divide Over Prediction Markets
The Tennessee ruling diverges from decisions in other states, including Nevada and Maryland, while aligning more closely with a New Jersey federal court that granted similar relief. Legal observers suggest the conflicting interpretations could eventually draw review by the Supreme Court of the United States.
The regulatory debate has intensified as prediction markets expand. In January alone, Kalshi processed more than $9.5 billion in trading volume, underscoring the growing scale of event-based derivatives in the United States.
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