A federal judge in Tennessee has granted a significant legal victory to prediction market platform Kalshi, issuing a preliminary injunction that prevents state officials from enforcing local sports gambling laws against the company. U.S. District Judge Aleta A. Trauger ruled that Kalshi is likely to succeed in its core argument: its sports event contracts qualify as "swaps" under federal commodities law, regulated by the Commodity Futures Trading Commission (CFTC), and are therefore not subject to state-level betting statutes.
The court's decision temporarily blocks enforcement actions by the Tennessee Sports Wagering Council while the broader lawsuit proceeds. Judge Trauger concluded that the outcome of a sports game can be considered an "occurrence" under Tennessee's legal definitions and that the potential downstream economic impacts of such events meet the threshold for a swap under the Commodity Exchange Act. Crucially, the judge determined that Kalshi cannot comply with both state licensing requirements and federal CFTC oversight, and that the federal regulatory framework must govern such derivatives platforms to avoid conflicting state demands.
This ruling adds to a fragmented national legal landscape for prediction markets. While Tennessee and New Jersey have granted Kalshi injunctive relief, courts in Nevada and Maryland have declined similar requests. The Nevada Gaming Control Board has filed a civil enforcement action against Kalshi, and other states like Ohio, New York, and Connecticut have ongoing motions, highlighting the unsettled regulatory environment. The CFTC has reinforced its claim of exclusive jurisdiction in a recent appellate filing, signaling a strong federal interest in preserving uniform control over these markets.
Kalshi, a CFTC-regulated designated contract market, offers binary event contracts on politics, sports, economics, and weather. The platform processed over $9.5 billion in trading volume in January 2026 alone, underscoring the scale and growing relevance of prediction markets within the broader derivatives sector. Industry observers expect continued litigation as courts work to reconcile conflicting federal and state interpretations, with this Tennessee decision serving as a potential milestone for nationwide regulatory clarity.
