Federal Judge Sides with Ohio, Rejects Kalshi's Claim That Sports Bets Are 'Swaps'

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In a significant ruling for the burgeoning prediction market industry, a federal judge has blocked an attempt by platform Kalshi to operate in Ohio under national financial regulations rather than state gambling laws.

U.S. District Chief Judge Sarah D. Morrison denied Kalshi’s motion for a preliminary injunction on Monday, allowing the Ohio Casino Control Commission (OCCC) to enforce a cease-and-desist order issued last March. The OCCC had ordered Kalshi to stop offering contracts on sports events, arguing they constituted illegal sports betting under Ohio law.

The core legal dispute hinges on classification: Kalshi, regulated at the federal level by the Commodity Futures Trading Commission (CFTC), contends its contracts on event outcomes are "swaps"—financial derivatives used to hedge risk. Ohio, and now Judge Morrison, assert they are straightforward bets on sports.

In a pointed 12-page opinion, Judge Morrison invoked the "Absurdity Doctrine," a principle championed by the late Supreme Court Justice Antonin Scalia, which advises against interpreting statutes in ways that lead to illogical outcomes. "Ohio argues that absurd results would flow from defining a 'swap' to include a sports-event contract. The Court agrees," she wrote.

"The statutory goals are better achieved when a 'swap' is understood as a transaction involving financial instruments... that traditionally and directly affect commodity prices," Morrison elaborated. "Currency exchange rates, the weather, and energy costs all do that; the number of points scored in the Huskies-Bobcats game does not."

The decision creates a direct conflict with a recent federal court ruling in Tennessee, which sided with a similar prediction market, setting the stage for a potential Supreme Court showdown. A Kalshi spokesperson stated the company "respectfully disagrees" and will "promptly seek an appeal."

Analysis & Impact: This ruling is a major victory for state gambling regulators, reinforcing their jurisdiction over sports-related wagering. It underscores the ongoing tension between innovative fintech platforms and established state gaming frameworks. If upheld on appeal, it could severely limit prediction markets' ability to offer contracts on political elections or cultural events outside of a handful of friendly jurisdictions, potentially stifling a sector some experts believe has value for information aggregation.

Reactions:

• Michael Chen, Gaming Compliance Attorney: "Judge Morrison's reasoning is sound and grounded in legislative intent. The CFTC's oversight of 'event contracts' was never meant to be a backdoor for nationwide sports betting, which the Supreme Court explicitly returned to state control in 2018."
• David Park, Fintech Analyst: "This is a setback for innovation. Treating these markets as pure gambling ignores their utility for hedging real-world risk—for instance, a business taking a position on election results that could impact policy."
• Rebecca Shaw, Consumer Advocate: "It's absurd that a company thinks it can dress up sports betting in Wall Street jargon to bypass state laws designed to protect consumers from addiction and fraud. The judge saw right through this charade. Good riddance."
• Alex Rivera, Political Risk Consultant: "The circuit split is now undeniable. This issue—defining the boundary between a financial instrument and a bet—is precisely the kind of federal question the Supreme Court needs to resolve to provide clarity for markets and regulators alike."