A federal judge denied Kalshi’s bid for a preliminary injunction against Ohio regulators on Monday, holding that the platform “failed” to establish CFTC’s exclusive jurisdiction over its sports-event contracts.
Judge Rejects Kalshi’s Argument
Kalshi filed a lawsuit in October against officials at the Ohio Casino Control Commission and state Attorney General Dave Yost, arguing that the Commodity Exchange Act should override Ohio’s sports gambling laws.
District Judge Sarah D. Morrison disagreed with Kalshi’s argument, stating that there is no historical evidence that Congress intended to preempt state sports gambling laws.
Morrison also objected to Kalshi’s view that its contracts should be treated as “swaps” similar to those in financial markets, labeling such a designation as “absurd.”
According to sports betting and gaming lawyer Daniel Wallach, Kalshi has appealed the federal court verdict.
Kalshi didn’t immediately respond to Benzinga‘s request for comment.
CFTC Vs. State Regulators
This ruling comes amid increasing scrutiny of prediction markets. A similar injunction barring state regulators from labeling Kalshi’s sports event contracts as unlawful gambling was revoked by a Nevada court last year.
Coinbase Global Inc. (NASDAQ:COIN), which offers prediction markets in partnership with Kalshi, also filed lawsuits against Michigan, Illinois, and Connecticut in December, seeking to establish that the CFTC is the sole regulator of these markets, not individual state gaming regulators.
Former New Jersey Gov. Chris Christie, who currently serves as a strategic advisor to the American Gaming Association, said that both Kalshi and Polymarket are violating gambling laws in every state in the country and warned that state-level legal challenges are inevitable.
However, CFTC has put its weight behind prediction markets. Chair Mike Selig said last month that prediction markets have been hit with an “onslaught of state-led litigation,” announcing he had filed a Friend of the Court brief to defend the agency’s exclusive jurisdiction over prediction markets.
Data shows that sports betting accounted for 80% of Kalshi’s all-time notional volume, according to Dune Analytics.
Price Action: Shares of companies involved in sports betting, including DraftKings Inc. (NASDAQ:DKNG) and Flutter Entertainment PLC (NYSE:FLUT), closed down 0.079% and 1.97%, respectively, in Tuesday’s regular trading. COIN shares closed down 1.64%
Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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