Tennessee Court Backs Kalshi as CFTC Asserts Control Over State Regulations

- A Tennessee judge issued an injunction allowing Kalshi to continue offering sports event contracts. - The ruling emphasizes federal jurisdiction over prediction markets under the Commodity Futures Trading Commission (CFTC). On February 20, 2026, U.S. District Judge Aleta Trauger issued a preliminary injunction for prediction market operator Kalshi. The injunction allows Kalshi to continue offering sports-related event contracts in Tennessee despite state gambling laws, preventing state officials from enforcing local betting regulations against the company while the courts adjudicate a broader lawsuit on the matter. According to a February 20 CoinDesk report, the court classified Kalshi's sports contracts as "swaps" under the federal Commodity Exchange Act. This designation places the contracts under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC). Consequently, federal authority preempts Tennessee's attempts to regulate them as unlicensed gambling activities. The ruling also extends a temporary restraining order from January that had halted the state’s enforcement, which included a cease-and-desist letter directed at Kalshi. This case marks a pivotal moment in the ongoing conflict between state regulatory authority and federal oversight of prediction markets, as Kalshi has faced legal and regulatory challenges in other jurisdictions with inconsistent outcomes. For instance, a Nevada court ruled that similar event contracts could be subject to state gaming laws, a decision that contrasts sharply with the one in Tennessee. The growing dispute underscores the tension between federal and state authority over regulating prediction markets. CFTC Chairman Michael Selig has consistently maintained the agency’s exclusive jurisdiction in this space, and the CFTC reinforced this position by recently filing an amicus brief in a separate case. Legal experts note that these jurisdictional conflicts may eventually escalate to higher courts and could potentially reach the U.S. Supreme Court. This ruling highlights the shifting regulatory landscape for prediction markets and underscores the broader implications of federal-state jurisdictional debates.