After State Lawsuit Losing Streak, Kalshi Nabs Victory in Tennessee—This Could Be Why

In brief

Kalshi won a preliminary injunction in Tennessee, but this conflicts with recent rulings in Nevada, Maryland, and Massachusetts, where judges sided with state regulators.
The split comes down to legal strategy: states using outside counsel and broader congressional intent arguments have beaten Kalshi, while those relying on narrower “swaps” arguments have lost.
With courts divided and the dispute escalating, the Supreme Court will likely need to resolve it.

After facing setbacks in key lawsuits against the states of Nevada, Massachusetts, and Maryland, Kalshi pulled off a win in Tennessee this week over the fate of sports-related prediction markets.

A federal district judge in the southern state granted Kalshi’s motion Thursday for a preliminary injunction in its lawsuit against Tennessee regulators. While that victory is not a verdict itself, it reveals the judge believes that Kalshi is likely to succeed on the merits of its case.

That case, as put forward by Kalshi, argues that the company’s sports-related wagers are not sports bets under the jurisdiction of state-level regulators, but instead event contracts under the federal purview of the CFTC.

The rosy Tennessee outcome for Kalshi is in direct opposition to rulings made recently by judges in Maryland, Massachusetts, and Nevada, which express that state regulators likely do have jurisdiction over sports-related prediction markets. Nevada is on the verge of becoming the first state in America to temporarily ban Kalshi sports markets while the lawsuit proceeds to trial.

So why are some judges siding so quickly with the states, while others are moving just as decisively into the prediction markets’ corner? The split may have less to do with blue states and red states (the issue is not necessarily partisan), and more to do with legal strategy.

So far, states that have notched victories against Kalshi and its competitors have argued, at least in part, that Congress never intended to give the CFTC a mandate broad enough to regulate sports-related wagers, or to take authority over sports wagers away from the states. Such arguments featured prominently in lawsuits filed by Massachusetts, Maryland, and Nevada against prediction market platforms.

For states, the lead argument should always be lack of congressional intent. Leading with “swaps” is an unforced error, especially since the MA and MD court rulings said it was irrelevant whether sports event contracts could satisfy the technical definition of a “swap.” https://t.co/C92iOxaBuL
— Daniel Wallach (@WALLACHLEGAL) February 20, 2026

The Tennessee case, on the other hand, focused on a more narrow legal argument: whether sports-related prediction markets can be considered “swaps” under the CFTC’s purview. That argument lost on Thursday, and it also lost last year in New Jersey’s case against Kalshi.

Daniel Wallach, a legal expert on prediction markets, said this week that leading with the swaps argument in court has become an “unforced error” for state regulators.

Wallach told Decrypt he believes such matters of strategy also boil down to resources. Tennessee and New Jersey relied on in-house counsel to craft and argue their cases, whereas Nevada, for instance—one of the most successful instances yet of a state taking on prediction markets—hired outside counsel, which crafted and successfully defended the congressional intent argument.

“It’s short-sighted,” Wallach said. “[Tennessee] failed to address certain issues that Nevada’s outside counsel would have crushed.”

The issue has gotten increasingly messy in recent weeks, as different states take different paths. Earlier this week, the head of the CFTC came out swinging in defense of the agency’s exclusive jurisdiction over prediction markets—only to be rebuked by a governor from his own party.

Ultimately, given the disparate conclusions that may soon be reached by multiple federal courts on the subject, it will likely be eventually resolved by the Supreme Court.