Kalshi recently achieved a mixed result of one win and one loss in two legal battles in Nevada and New Jersey, ending up in a draw. Last Friday, Judge Jason Woodbury of the First Judicial District Court of Nevada approved the state's preliminary injunction against Kalshi and extended the temporary restraining order for 14 days, prohibiting Kalshi from offering sports, election, and entertainment event contracts to Nevada users. Kalshi has been restricting these contracts since March 20, and this extension will keep the ban in place until April 17, with a hearing scheduled for April 16 at the Ninth Circuit Court of Appeals in San Francisco. Interestingly, shortly after the setback in Nevada, Kalshi won a significant victory in the Third Circuit Court of Appeals in Philadelphia, where a 2-1 panel decision upheld the lower court's ruling in favor of Kalshi, confirming that the platform is only subject to federal derivatives law and not state gambling regulations. Frankly speaking, the two decisions, one in the east and the other in the west, make the legal boundaries of the prediction market even more elusive.
Nevada Loss: Judge Says "Sports Contracts Indistinguishable from Sports Betting"
In the Nevada case, Judge Woodbury seemed unswayed by Kalshi's "federal preemption" argument and explicitly stated that sports betting and sports contract trading are "indistinguishable." He ultimately ruled that, according to Nevada law, prediction market trading "falls under prohibited gambling activities." Mike Dreitzer, chairman of the Nevada Gaming Control Board, expressed "great satisfaction" with the ruling and vowed to continue "vigorously enforcing Nevada law to protect the state's gambling industry." Notably, Nevada also has pending cases against Robinhood and Crypto.com, with hearings scheduled for the same day. This indicates that Nevada is systematically targeting all prediction market platforms.
New Jersey Victory: Federal Appeals Court Supports Kalshi for the First Time
The victory in the New Jersey case is a milestone. Judge David Porter wrote in the majority opinion that Kalshi "has demonstrated the burden of preliminary injunction relief" and "shows a reasonable chance of success on the argument that the Commodity Exchange Act takes precedence over state law." The court considered both field preemption and conflict preemption applicable. Porter emphasized that New Jersey's regulatory framework is too broad (covering all sports betting), whereas the correct perspective should be narrow (regulating transactions on federally designated contract markets). The Commodity Exchange Act explicitly prohibits states from interfering with swap contracts traded on CFTC-licensed designated contract markets. Kalshi's sports-related event contracts fall into this category, thus the CFTC has exclusive jurisdiction. Judge Jane Roth, holding the dissenting opinion, bluntly stated that Kalshi's argument was "insincere," considering its actions "a performative sleight of hand," essentially equating to sports betting.
Legal Battle Escalates: CFTC Actively Sues Three States
These two rulings are the latest hotspots in the increasingly expanding legal conflict between prediction markets, states, and the federal government. Since Kalshi's victory in litigation with the CFTC at the end of 2024 and the launch of political contracts, the prediction market has expanded into sports, pop culture, and other areas, sparking a new wave of litigation. Currently, federal courts, state courts, tribal entities, civil cases, criminal cases (Arizona), class actions, and even federal government lawsuits against state governments are all being activated. Last week, under the leadership of Chairman Michael Selig, the CFTC proactively sued Illinois, Connecticut, and Arizona to defend its exclusive regulatory authority over prediction markets. Former CFTC Chief Legal Counsel Rob Schwartz called this move "absolutely unprecedented." Selig stated, "The CFTC will continue to uphold its exclusive regulatory authority over these markets and protect market participants from overzealous state regulatory agencies." Additionally, the CFTC has issued a proposed rulemaking advance notice regarding prediction markets this month, with a public comment period lasting until April 30. For more updates on U.S. prediction market regulations, keep an eye on PASA's official website.
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This article is from "PASA-Global iGaming Leaders," a gambling industry news channel: https://t.me/pasa_news
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