Kalshi Responds In New Jersey Federal Court Case

Kalshi submitted a 16-page document to the court in New Jersey, defending their position that designated contract markets are under the authority of the Commodity Futures Trading Commission (CFTC).

New Jersey issued Kalshi with a cease-and-desist letter earlier this month, but Kalshi responded by suing the state regulator.

In a similar case in Nevada, a judge ruled in Kalshi’s favor and granted a preliminary injunction, which allows the company to continue operating in the state. The reply from Kalshi’s lawyers led with this in the hope they will receive the same ruling.

The brief started, “Since filing suit in this case, Kalshi obtained a preliminary injunction in Nevada litigation presenting almost identical issues. The Nevada District Court concluded that ‘because Kalshi is a CFTC-designated DCM, it is subject to the CFTC’s exclusive jurisdiction and state law is field preempted.'”

Kalshi’s arguments

Kalshi broke their argument into three main points:

• Kalshi Is Likely To Succeed On The Merits Of Its Preemption Claim.
• Kalshi Faces Imminent Irreparable Harm Based On The Face Of The State’s Cease-And-Desist Order.
• The Balance Of The Equities And The Public Interest Support Granting A Preliminary Injunction To Kalshi.

The company’s lawyers argue that the Nevada ruling is decisive and other states should follow this precedent. They made the same point when suing Maryland earlier this week. The case in Maryland will be the third court hearing after Nevada and New Jersey.

A positive ruling in New Jersey would further strengthen Kalshi’s arguments which often cite the Nevada judgment.

The document went on to add, “Defendants here barely acknowledge this decision, but it confirms that a preliminary injunction is warranted. Kalshi should not be required to incur irreparable harm while it litigates here after another federal court granted preliminary relief.”

The brief also makes it explicit that Kalshi is not an unlicensed betting platform as state regulators are accusing. They firmly state that designated contract markets are legal and regulated, but regulated by the CFTC, not the states.

The third argument concludes by stating, “The question here is not whether trading on DCMs should be regulated, but by whom. Congress’s clear answer is that the CFTC has ‘exclusive jurisdiction.'”

Designated contract markets in sports

The CFTC has stayed silent til now on Kalshi’s markets on sporting events. They did, however, order the suspension of Crypto.com’s sporting markets while they investigate the matter.

Despite the request, Crypto.com has continued to offer and expand its sports event contracts. They started offering NBA match winner markets, and this move was followed by Kalshi.

As a result, Crypto.com also received cease-and-desist letters from Illinois, Maryland, and Ohio, but not Nevada or New Jersey. Kalshi’s court cases will set a precedent for potential court rulings against Crypto.com as well. Crypto.com also sued Maryland in response to its cease-and-desist order.

The CFTC will hold a roundtable discussion on designated contract markets in sports next week, which could also bring more clarity.