Although the Commodity Futures Trading Commission (CFTC) case against Kalshi has been dismissed, the company’s legal battles rumble on.
Currently, Kalshi has filed lawsuits against state regulators in Maryland, Nevada and New Jersey, who all issued cease and desist orders against the company, claiming that its market of event contracts tied to sports outcomes violates state gaming laws.
At the start of the year, Kalshi began to offer event contracts related to some of America’s major professional sports leagues.
So far, Kalshi has been granted preliminary injunctions in Nevada and New Jersey, allowing it to keep its sports contracts online. A hearing on the injunction in Maryland will be held at the end of the month.
At the heart of the conflict is whether the CFTC has exclusive jurisdiction to regulate Kalshi’s sports event contracts through a federal law called the Commodity Exchange Act (CEA), which regulates commodities and futures trading activities.
Judge Edward Keil, who granted Kalshi an injunction in New Jersey, stated that he is “persuaded that Kalshi’s sports-related event contracts fall within the CFTC’s exclusive jurisdiction and unconvinced by [the] defendants’ arguments to the contrary.”
As a result, a battle of federal versus state control of the regulation of sports prediction markets is set to ensue in the courts.
Alongside the abovementioned states, Kalshi has also received cease and desist orders from Montana, Illinois and Ohio. Other states, including Kansas, Washington and Connecticut, are reportedly looking into Kalshi’s sports offerings
Following the New Jersey judge’s decision, Sara Slane, Head of Corporate Development at Kalshi, reaffirmed the company’s belief that it is “firmly on the right side of the law”.
“We are grateful for the court’s attention and well-reasoned position,” she added. “We look forward to a swift resolution of these cases and will continue to educate regulators and the public on the benefits of prediction markets and the stringent federal regulations under which we operate.”
