After a string of courtroom setbacks in Nevada, Massachusetts, and Maryland, prediction market operator Kalshi has finally chalked up a legal win-this time in Tennessee-over the future of its sports-linked contracts. And the way the case was argued may explain why the company prevailed where it had previously stumbled.
A federal district judge in Tennessee on Thursday granted Kalshi’s request for a preliminary injunction against state regulators. That order doesn’t resolve the lawsuit outright, but it does something almost as important: it signals the court believes Kalshi is likely to succeed on the core legal questions once the case is fully heard.
At the center of the dispute is a deceptively simple issue: what exactly is Kalshi selling? Tennessee regulators have treated the company’s sports-related products as sports bets, subject to the state’s gambling and sports wagering regime. Kalshi argues the opposite-that its products are “event contracts” overseen at the federal level by the Commodity Futures Trading Commission (CFTC), not betting products falling under state authority.
In Tennessee, at least for now, the federal framing has the upper hand. By issuing the preliminary injunction, the judge effectively froze state enforcement actions against Kalshi while the case proceeds, and signaled agreement with the notion that these contracts fall closer to federally regulated derivatives than to traditional sports gambling.
The outcome stands in sharp contrast to Kalshi’s experiences elsewhere. In Nevada, Massachusetts, and Maryland, state officials have largely succeeded in keeping prediction markets on a short leash. There, courts have proved receptive to arguments that Congress never intended prediction markets-or any financialized wagers on real-world events-to escape traditional gambling oversight simply by being routed through a CFTC-regulated platform.
A key distinction, according to legal experts watching these cases, is how courts choose to frame the question. When states argue from congressional intent-claiming that federal commodity laws were never meant to displace state gambling authority-judges have tended to side with regulators. But when cases turn on narrower statutory definitions of “bet,” “wager,” or “sports betting,” and on whether specific activities technically fit within those definitions, prediction market operators like Kalshi have a better shot.
Tennessee appears to fall into the second category. Rather than treating the entire model as a threat to the traditional division of federal and state powers, the court dug into the wording of Tennessee’s gambling and sports wagering laws and compared them carefully with the federal commodity framework. That shift in focus-from big-picture intent to precise textual fit-opened space for Kalshi’s argument that it is offering federally regulated event contracts, not state-level gambling products.
Kalshi’s pitch to the court leaned heavily on the CFTC’s existing role. The company characterizes its markets-whether tied to economic releases, political outcomes, or sports-linked events-as standardized contracts that can be traded, cleared, and settled much like futures. From that perspective, state regulators are intruding on a domain Congress assigned to a federal expert agency. Tennessee’s judge didn’t fully endorse that view yet, but the injunction suggests the court finds it plausible enough to warrant protection while litigation continues.
The stakes extend far beyond a single state. As prediction markets mature, they increasingly straddle two legal universes: the long-standing, state-centric world of gambling regulation and the federal ecosystem of derivatives and commodities. Where a specific product lands determines everything-from which licenses are needed and which consumer safeguards apply to what kinds of markets can be offered at all.
Kalshi’s recent losing streak illustrated how unfavorable that terrain can be when courts prioritize congressional intent. When judges are persuaded that Congress meant to preserve robust state control over wagering, they are more likely to interpret ambiguities against prediction markets, even if the statutory text can be read in multiple ways. Those decisions send a strong message: innovation cannot sidestep local gambling rules merely by leaning on a federal label.
Tennessee, by contrast, underscores the power of granular statutory analysis. If a state’s gambling laws were drafted with traditional bookmakers and sportsbooks in mind-parlays, point spreads, and moneyline bets-then a platform selling standardized, tradeable contracts on whether a team will, for example, reach a certain number of wins in a season may not fit cleanly within those definitions. The more courts are forced to parse that mismatch, the more room prediction markets gain to argue they belong under the CFTC’s umbrella instead.
For regulators, the case highlights a strategic dilemma. When they base their arguments on broad notions of public policy-protecting consumers from speculative gambling, preserving state tax bases, or preventing unregulated betting-their position can sound compelling but be vulnerable if the statutory text is less than clear. Agencies that instead tie their enforcement directly to carefully drafted definitions and explicit legislative findings tend to have more durable success.
For Kalshi and similar platforms, Tennessee is not just a relief but also a roadmap. The decision suggests that their best chances lie in states where gambling statutes are narrow, outdated, or heavily focused on the mechanics of traditional sports betting. In those jurisdictions, emphasizing the financial and hedging functions of event contracts, their standardized design, and their alignment with federal commodities law may resonate more strongly than broad appeals to innovation or market freedom.
The injunction also matters for users and the broader prediction market ecosystem. A favorable federal ruling in Tennessee could embolden other states-or at least their courts-to carve out space for CFTC-regulated event contracts, even if legislatures haven’t yet modernized their gambling codes. Conversely, if Tennessee ultimately reverses course and sides with regulators at trial, it will reinforce the emerging pattern: when in doubt, courts defer to state control over betting-like activity.
There is also a political dimension. Some policymakers see prediction markets-especially around politics and sports-as dangerously close to mainstreaming betting on every aspect of public life. Others view them as sophisticated tools for price discovery and risk management, where participants can hedge real-world exposure (for example, a business exposed to game-day revenues or advertising outcomes) rather than simply gamble. How judges internalize those competing narratives can subtly influence whether they treat these products as economic instruments or moral hazards.
In the longer term, Tennessee’s case could accelerate calls for clearer federal guidance. If event contracts continue to collide with state gambling regimes, Congress may eventually face pressure to clarify where CFTC jurisdiction ends and state authority begins, particularly when contracts track outcomes that have historically been the province of betting rather than hedging.
For now, Kalshi’s Tennessee victory is provisional but telling. Where previous courts have rallied around the idea that Congress never meant to let prediction markets bypass state gambling oversight, Tennessee’s judge focused instead on the letter of the law and the technical character of the contracts at issue. That shift in emphasis-from congressional intent to statutory detail-may be exactly why this state broke the company’s losing streak.