A federal judge in Ohio ruled Monday that prediction market platform Kalshi must adhere to state gambling regulations, delivering a setback to the company's legal challenge against state oversight.

U.S. District Judge Sarah D. Morrison denied Kalshi's request for a preliminary injunction against state regulators, rejecting the company's argument that federal commodity exchange laws should override Ohio's sports gambling regulations.

In her ruling, Morrison determined that the Commodity Exchange Act does not preempt Ohio's existing sports gambling laws, a key argument Kalshi had made in seeking to avoid state-level regulation of its platform.

The decision means Kalshi must comply with Ohio's regulatory framework for gambling operations while operating in the state. The ruling represents a significant legal development for prediction markets, which have faced varying regulatory treatment across different states.

Kalshi operates as a prediction market platform where users can place bets on various outcomes, including political events and other future occurrences. The company's business model has attracted scrutiny from state gambling regulators who argue such platforms fall under their jurisdiction.