Paradigm Backs Kalshi in Latest Prediction Market Challenge

Today, Paradigm filed an amicus brief with the Sixth Circuit in KalshiEX LLC v. Orgel, urging the court to reject Tennessee’s attempt to regulate Kalshi’s federally licensed exchange. Tennessee is the latest state to claim authority over prediction markets but, as we make clear in our brief, it runs headlong into the same reality as those who came before it: a decades-long trail of evidence that Congress expressly designed the Commodity Exchange Act to prevent state-by-state regulation of these national exchanges.

The pattern here will be familiar to anyone who has followed this litigation. Tennessee argues that Kalshi’s sports-event contracts are gambling, not federally regulated derivatives, and that its sports wagering law can therefore shut Kalshi out of the state. The trial court disagreed, and Tennessee has now appealed to the Sixth Circuit.

Much like Tennessee’s modern-day complaints about sports contracts, states have been arguing for more than a century that commodity trading amounts to nothing more than “gambling in grain.” That argument was wrong then, and it is wrong now. The text of the CEA, backed by a detailed and one-sided legislative record, makes clear that Congress recognized the value of these markets and that it intentionally gave the CFTC exclusive jurisdiction over them. The Third Circuit confirmed as much when it became the first (and only) federal appeals court to address this question earlier this year, and the Sixth Circuit should reach the same result.

And while each case puts a new twist on the arguments, the same statutory text, legislative history, and agency record continues to support preemption. Here, Tennessee argues that Kalshi’s contracts depend on a sports “outcome,” not an “occurrence,” and that reading federal law to cover those contracts makes other provisions of the statute meaningless. But as our brief makes clear, Congress deliberately wrote those provisions broadly to prevent exactly this type of state interference, and treating them otherwise gets the law exactly backwards.

Just as we did in New Jersey, Maryland, Nevada, California, and Massachusetts, we’ll keep fighting (and filing) to defend prediction markets from state actors who see political advantage in targeting these federally regulated exchanges. Our brief is available here.