Kalshi is two for two in its legal crusade against gambling regulators, which the company argues, have no remit to regulate its activities when it comes to prediction markets.
Faced with cease-and-desist letters by the Nevada Gaming Control Board and the New Jersey Division of Gaming Enforcement, among a plethora of others, Kalshi has scored a temporary legal victory against the latter regulator most recently.
Court sides with Kalshi and grants temporary injunction against cease-and-desist letter
Kalshi has been given a preliminary restraining order and a temporary injunction, as per the company’s original filing with the US District Court for the District of New Jersey. This is the second federal court, after the US District Court for the District of Nevada, to at least temporarily side with Kalshi in the matter.
However, a temporary injunction has more to do with giving time to Kalshi to argue its case in front of the courts. Kalshi’s line of reasoning has been clear from the start – prediction markets are not the same as sports gambling, nor can they be regulated under the same laws.
A number of regulators have sent Kalshi legal notices, and the company has now been fighting back in court, including in Maryland, where it recently launched a similar complaint against the gambling regulator.
Kalshi is regulated under the Commodity Futures Trading Commission (CFTC), at a federal level, which means that it is free from local gambling laws and regulations. Judge Edward Kiel had this to say, delivering the injunction that favored Kalshi in the case:
"I am persuaded that Kalshi’s sports-related event contracts fall within the CFTC’s exclusive jurisdiction and am unconvinced by the defendant’s arguments to the contrary. Defendants argue that sporting events are without potential financial, economic, or commercial consequence. On the record before me, I disagree," Judge Kiel wrote in his verdict.
Kalshi has a track record of pushing back against regulators in courts
The latest development constitutes an important early win for Kalshi, which has already been in a fight with regulators. Although the CFTC tried to block Kalshi from offering prediction markets for the US presidential election, the regulator was defeated in court.
Ever since, Kalshi has been pushing more boldly into various events, adding them to its platform – the expansion to sports, however, has ruffled gambling regulators’ feathers who have seen this as encroachment on the part of the prediction market.
Yet, to argue their case, they would need to prove to the courts that their cease-and-desist letters are based on merit.
