Kalshi’s Legal Battles With States Continue Despite CFTC Dismissal

While a case against event contracts platform Kalshi brought by the federal regulator, the Commodity Futures Trading Commission (CFTC), has been dismissed, the company remains engaged in legal battles with several US state regulators who claim its sports event contracts violate state gaming laws. This situation highlights the ongoing conflict over regulatory jurisdiction in the burgeoning prediction market space.

Despite the dismissal of the case brought against Kalshi by the CFTC, the company’s legal challenges with state regulators across the United States persist. Kalshi has proactively filed lawsuits against state regulators in states including Maryland, Nevada, and New Jersey. These legal actions followed cease and desist orders previously issued by these state regulators against Kalshi. The basis of the state regulators’ claim is that Kalshi’s market, which offers event contracts tied to the outcomes of sporting events, violates state gaming laws. Providing context, at the start of the year (early 2025), the CFTC had approved Kalshi to offer contracts on sporting events hosted by America’s major professional sports leagues.

Federal vs State Jurisdiction at Core

The central issue at the heart of these ongoing legal conflicts is whether the CFTC holds exclusive jurisdiction to regulate Kalshi’s sports event contracts under federal law, specifically the Commodity Exchange Act (CEA), which governs commodities and futures trading activities.

Reports from the legal proceedings indicate the status of Kalshi’s lawsuits against the states. The company has so far been granted preliminary injunctions in both Nevada and New Jersey. These injunctions permit Kalshi to keep its sports contracts online in those states while the legal process continues. In Maryland, a hearing concerning the injunction is scheduled to be held at the end of May 2025.

Presenting the view from Judge Edward Keil, who granted the injunction in New Jersey, as reported by iGaming Times from the ruling, he stated that he was “persuaded” that Kalshi’s sports-related event contracts fall within the CFTC’s exclusive jurisdiction. He also found the arguments presented by the defendants (the state regulators) to the contrary to be “unconvincing.” This judicial stance in New Jersey sets the stage for further court battles across the country over whether federal or state authorities have primary regulatory control over sports prediction markets. In addition to the states where Kalshi has filed lawsuits, the company has also received cease and desist orders from Montana, Illinois, and Ohio. Furthermore, other states, including Kansas, Washington, and Connecticut, are reportedly looking into Kalshi’s sports offerings.

Kalshi’s Stance and Outlook

Kalshi has maintained a clear stance on the legal challenges it faces. Following the New Jersey judge’s decision, Sara Slane, Head of Corporate Development at Kalshi, reportedly reaffirmed, as reported by iGaming Times from a statement, the company’s belief that it is “firmly on the right side of the law.” She also conveyed, as reported by iGaming Times from the statement, gratitude for the court’s attention and well-reasoned position. Slane stated that the company looks forward to a swift resolution of these cases and will continue its efforts to educate regulators and the public on the benefits of prediction markets and the stringent federal regulations under which they operate.

In conclusion, despite the dismissal of the federal CFTC case, Kalshi continues to face significant legal hurdles from multiple US states that are challenging the legality of its sports event contracts under state gaming laws. The ongoing lawsuits and the granting of preliminary injunctions highlight the core conflict over federal versus state regulatory jurisdiction in the prediction market space, indicating that further court battles are anticipated as Kalshi defends its position and seeks clarity on the regulatory landscape for its innovative offerings.