The full ruling in Kalshi’s case in Nevada came out yesterday, which was good news for the event contracts company.
Chief Judge Andrew Gordon filed the ruling after granting Kalshi a temporary restraining order in response to Nevada issuing a cease-and-desist order.
Gordon said it is not up to state regulators to oversee Kalshi’s business, but it is a matter for the Commodity Futures Trading Commission (CFTC).
“Section 2’s plain and unambiguous language grants the CFTC exclusive jurisdiction over accounts, agreements and transactions involving swaps or contracts of sale of a commodity for future delivery that are traded or executed on exchanges that the CFTC has designated…,” wrote Gordon.
“Nevada regulatory agencies thus have no jurisdiction to decide that Kalshi’s conduct violates state law where, at least at present, those activities are legal under federal law.”
Trouble may lie ahead for event contracts
It was a clear victory for Kalshi, but Gordon warned that trouble might lie ahead.
“Kalshi is, in some sense, proceeding at its own risk and creating its own harms. Things might turn out differently with election contracts if the D.C. Circuit rules against Kalshi or if the CFTC takes action against Kalshi’s sports contracts,” he noted. “But for now, I will preserve the status quo, which is that these contracts are legal under federal law.”
New Jersey will make a ruling next week in a similar case. Kalshi has requested a court injunction against the New Jersey Division of Gaming Enforcement (DGE). Like Nevada, the DGE issued a cease-and-desist letter to the event contracts firm following their March Madness markets.
Four other states have also issued cease-and-desist letters, and Connecticut is also investigating. However, Kalshi will be hopeful that judges will align with Gordon in Nevada.
The company has always insisted that the CFTC have authority over their business.
In an interview last week, CEO Tarek Mansour commented, “we are regulated at the federal level. The state law doesn’t really apply.”
The fight goes on
The ruling is a big victory for Kalshi, but it is unlikely to put an end to their legal fights. States have grown frustrated by the company declaring it offers legal betting in all 50 states.
When opening election event contracts on the US Presidential race last year, the CFTC became involved and ordered Kalshi to withdraw. However, the company did not back down and won a ruling in court allowing the election betting markets to continue.
In battling the CFTC, Mansour commented “we’ve had to eat a lot of s— over the last five years,” said Mansour. “I’d do it again in heartbeat.”
The fight moves on to New Jersey next week. The CFTC has also scheduled a meeting to discuss sports event contracts on April 30th.
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