Kalshi faces renewed legal pressure after the U.S. Court of Appeals for the Tenth Circuit rejected the company’s request for emergency protection while it appeals a ruling that allows Utah to apply its gambling laws to sports-related event contracts.

The decision leaves Utah free to pursue possible enforcement action against the prediction market operator while the broader legal dispute continues. Kalshi had requested an injunction that would have prevented the state from acting until the appeals court reached a final decision.

The Tenth Circuit denied the request after finding that Kalshi had failed to meet the requirements needed for emergency relief. The court stated: “When seeking an injunction pending appeal, a movant must show: (a) ‘the likelihood of success on appeal’; (b) ‘the threat of irreparable harm if the … injunction is not granted’; (c) ‘the absence of harm to opposing parties if the … injunction is granted’; and (d) ‘any risk of harm to the public interest.’ Kalshi has not shown these factors weigh in its favor. Accordingly, we deny its motion.”

According to InGame, the ruling does not resolve whether federal law overrides Utah’s gambling restrictions. It only removes the temporary protection Kalshi sought while continuing its appeal.

Utah Gains Ability To Act During Appeal

Kalshi originally filed a federal lawsuit against Utah officials in early 2026, arguing that its sports event contracts fall under federal oversight because the company operates as a Commodity Futures Trading Commission (CFTC)-regulated designated contract market.

The company argues that its products qualify as event contracts or swaps under the Commodity Exchange Act (CEA), placing them outside the reach of state gambling regulations. Utah officials have taken the opposite position, arguing that contracts connected to sporting outcomes function as betting products that must comply with state gambling rules.

In August, U.S. District Judge Robert Shelby ruled in favor of Utah, finding that the CEA does not prevent the state from enforcing gambling restrictions against Kalshi’s sports contracts. The judge concluded that gambling regulation remains an area traditionally controlled by states.

With the Tenth Circuit denying Kalshi’s emergency motion, Utah can now consider civil or criminal enforcement measures. Utah law makes it a third-degree felony to intentionally provide or offer online gambling services to individuals in the state.

The legal uncertainty affects Kalshi users because access to sports contracts may depend on location. Several states have already challenged prediction market operators, with courts issuing different decisions on whether these products should be treated as financial instruments or gambling activities.

Prediction Market Litigation Expands Across States

Kalshi’s Utah case forms part of a wider dispute between prediction market companies and state regulators across the US.

Courts in several jurisdictions have examined whether the Commodity Exchange Act prevents states from applying gambling laws to sports event contracts. A recent decision from the Ninth Circuit supported Nevada regulators, with the court finding that Kalshi’s sports products were likely gambling contracts rather than swaps.

“The CFTC is not a national gambling regulator,” Circuit Judge Ryan Nelson wrote in the Ninth Circuit opinion.

The Ninth Circuit ruling created a conflict with an earlier Third Circuit decision involving New Jersey, where judges found that Kalshi had shown a reasonable likelihood that its contracts could qualify as swaps under federal law.

According to legal analyst Daniel Wallach, states have won 12 consecutive federal rulings following an earlier Minnesota case that favored prediction markets. He also said states prevailed in 35 of 41 procedural decisions involving preliminary injunctions, temporary restraining orders, stays, or injunctions pending appeal.

However, these rulings do not always determine the final outcome of the lawsuits. Courts reviewing emergency requests generally assess factors such as the likelihood of success, potential harm, and public interest before deciding whether temporary relief should be granted.

Supreme Court Could Review Federal-State Dispute

The disagreement over prediction market regulation may eventually reach the U.S. Supreme Court.

New Jersey has asked the Supreme Court to review the Third Circuit decision involving Kalshi. The petition asks whether the Commodity Exchange Act prevents states from applying sports gambling laws to contracts offered through federally regulated markets.

New Jersey argues that Congress did not clearly remove state authority over sports wagering when it passed the Dodd-Frank Act. Kalshi has maintained that federal oversight prevents conflicting state restrictions.

The Supreme Court has not yet agreed to hear the case.

Meanwhile, the legal environment continues to change across the country. Washington has restricted Kalshi’s access to contracts involving sports, elections, politics, entertainment, culture, technology, and science, while allowing some markets connected to commodities, climate, economics, and finance.

Michigan has also restricted sports contracts after a court order required Kalshi to keep those products unavailable to residents.

The outcome of these cases could determine whether prediction market operators can offer the same sports contracts nationwide or must adjust their services according to individual state gambling laws.