Kalshi scored another court victory in their battle against state regulators on Monday. A New Jersey judge granted the company a preliminary injunction that allows their sports prediction markets to continue.
The New Jersey Division of Gaming Enforcement had sent a cease-and-desist letter to Kalshi earlier this month due to claims that they are offering unlicensed sports betting.
Judge Edward S. Kiel gave the same ruling that Kalshi received in a similar case in Nevada. Kiel reasserted Kalshi’s persistent claim that the Commodity Futures Trading Commission (CFTC) has authority over their business.
Kiel stated, “I am persuaded that Kalshi’s sports-related event contracts fall within the CFTC’s exclusive jurisdiction and am unconvinced by defendants’ arguments to the contrary.”
Sports prediction markets have financial consequences
Kalshi argues that their markets have “real-world financial consequences” and are therefore acceptable under the definition of designated contract markets.
Judge Kiel bought that argument. He went on to add, “Defendants argue that sporting events are without potential financial, economic, or commercial consequence. On the record before me, I disagree.”
Kalshi also argued that the cease-and-desist order was damaging the company, and the judge agreed. Kiel commented that, “Kalshi has identified harms to its reputation and goodwill that are both likely without injunctive relief and not able to be remedied following trial.”
Following the same judgment in Nevada, Kalshi will be confident of getting similar wins in other states that issued cease-and-desist letters. They also filed a lawsuit in Maryland last week, along with Crypto.com.
CFTC remains silent
Judge Kiel also stated that the CFTC can essentially allow betting markets by using a special rule. In the judgment, he wrote, “Even if Kalshi’s sports contracts involve ‘gaming,’ that would not subject Kalshi to state gaming laws. Rather, it would subject Kalshi to the special rule that allows the CFTC to conduct a public interest review.”
The CFTC, however, remains silent on sports prediction markets. The organization had scheduled a roundtable to discuss the growing concerns around the event contracts for April 30th, but cancelled the meeting last week.
State regulators remain frustrated by the lack of clarity from the CFTC. In addition to the six states that have sent cease-and-desist letters, several others are investigating the issue.
States face several challenges to legal betting markets, with event contracts, sweepstakes, and crypto betting sites all growing in popularity.
Expansion of sports markets
Despite the legal scrutiny, Kalshi and Crypto.com have expanded their sports markets. Both sites are offering NBA match winner markets during the playoffs. Over the weekend, sports prediction markets accounted for 75% of all Kalshi’s contracts. The majority of these were NBA match markets.
Additionally, the sites have also created markets for NHL and MLB matches, as well as the Super Bowl. As an official partner of the UEFA Champions League, Crypto.com will likely expand into soccer match markets, too.
Soccer betting accounts for over 40% of the global betting industry, and with the World Cup in North America next year, the event will attract a lot of attention.
The latest ruling paves the way for further expansion into more and more sports.
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