A US appeals court ruled Friday that Ohio and Tennessee can regulate Kalshi’s so-called event contracts under gambling laws, dealing the prediction market giant one of its biggest legal blows yet.

The ruling by the ​6th US Circuit Court of Appeals – which focused on sports bets, Kalshi’s main cash cow – said ​the company has failed to demonstrate that its ‌event ⁠contracts are “swaps” that should be regulated exclusively by ​the ​federal ⁠Commodity Futures Trading Commission. 

The question of whether state law applies to Kalshi and other prediction market operators has been a hotly contested issue, with the companies enjoying a light regulatory touch from the CFTC to date.

A US appeals court ruled against the prediction markets operator Kalshi, saying states can regulate its so-called event contracts under their gambling laws. Kalshi CEO Tarek Mansour, above. Bloomberg via Getty Images

The ruling could help usher in a tougher era for the rapidly growing businesses in forcing them to comply with state and gaming regulators throughout the country.

The decision could also pave the way for prediction market sports betting to be banned outright in huge markets – like California – that don’t allow sports wagers. 

Fridays’ ruling is the latest decision in a heated legal saga in which Kalshi has been battling more than a dozen state lawsuits. It has also been locked in a bitter feud with Native American tribes that have slapped the New York startup with their own trio of lawsuits to remove Kalshi from tribal land, as The Post reported this week. 

Venture capitalists have continued to pour cash into Kalshi despite the mounting legal threats SOPA Images/LightRocket via Getty Images

Kalshi says its wagers are financial instruments that it calls “event contracts” and “swaps,” and thus fall under the regulatory umbrella of the CFTC alone. States and tribes argue that Kalshi’s event contracts – in which users take either a “yes” or “no” position on a particular outcome – are indistinguishable from gambling.

“We hold that Kalshi has not shown that its sports-event contracts satisfy the statutory definition of a “swap” so as to fall within the scope of the CFTC’s ‘exclusive jurisdiction,’” stated the ruling from the 6th Circuit court, which is based in Ohio.

The ruling added that “even assuming that Kalshi’s sports-event contracts are swaps, we alternatively hold that the Commodities Exchange Act neither expressly nor impliedly preempts Ohio’s or Tennessee’s gambling laws.”

Kathryn Rand, a University of Nevada Las Vegas law prof who studies Indian gaming law, recently told The Post that if judges view prediction market wagers as mirroring gambling – regardless of semantics – that could have huge implications for the companies. 

The ruling in favor of Ohio and Tennessee is the latest decision in a heated legal saga in which Kalshi has been battling more than a dozen state lawsuits. Nashville’s Nissan Stadium is seen here. Getty Images

“These judges might be more persuaded by – this quacks like a duck, it looks like a duck, this is obviously a duck, and it ought to be regulated under state law. Period,” she said.

Venture capitalists have continued to pour cash into Kalshi despite the mounting legal threats – the company has raised $2.6 billion total and has reportedly been in talks for additional financing that could value it at $40 billion.

Investors say they’re optimistic that the company can defeat at least some of the suits.

Some venture capitalists have said the Trump administration’s support of prediction markets could mean that by the time a new administration comes in, Kalshi may be so integrated into financial markets – and everyday life for many Americans – that unwinding it would be deeply unpopular. 

Kalshi did not immediately answer a request for comment.