Kalshi Granted Injunction By US District Court, Given Green Light To Stay Open In New Jersey
Kalshi continues to take heat from states that allege its prediction markets overstep their sports betting laws. However, it remains undefeated in court after another recent victory in New Jersey.
The US District Court for the District of New Jersey ruled in Kalshi’s favor last week after the state served the event contracts platform a cease-and-desist letter in March. The court granted Kalshi a preliminary injunction, allowing it to continue offering sports contracts in New Jersey.
Kalshi’s victory marks its second major win in a short timeframe. It received the same ruling in Nevada in mid-April, and the pair of decisions figures to factor into future federal court decisions related to sports prediction markets.
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Kalshi successfully stands its ground
Kalshi received a cease-and-desist letter from the New Jersey Department of Gaming Enforcement on March 27 and responded by filing a lawsuit. It began offering sports markets for the Super Bowl and allowed March Madness contracts, which prompted New Jersey to take action before Newark’s Prudential Center hosted the tournament’s East Regional.
A federally regulated exchange, Kalshi took the same action against the Nevada Gaming Control Board after receiving a cease-and-desist order at the beginning of March. Kalshi CEO Tarek Mansour said the two states sought to undermine the Commodity Futures Trading Commission, the federal agency responsible for regulating futures contracts, options and other commodities.
The states said Kalshi’s sports prediction markets violate Nevada and New Jersey gambling laws. Kalshi claimed its event contracts are valid under federal law and motioned for preliminary injunctions in both states.
So far, two out of two judges have sided with Kalshi.
Previous rulings contribute to decisions
The District Court of New Jersey had a pair of rulings to reference before making a decision. Most recently, the Nevada ruling (Kalshi v. Hendrix) found that Kalshi satisfied all four elements to be granted a preliminary injunction:
- Likelihood of success on the merits
- Likelihood of irreparable harm if relief not granted
- Balancing of equities among the interested parties
- Whether injunction is in the public interest
The New Jersey and Nevada courts also leaned on an initial ruling from last year (Kalshi v. CFTC). In that case, the DC Court of Appeals ruled that Kalshi’s contracts related to US election outcomes were legal and did not constitute “gaming” or “election gambling.”
Kalshi v. CFTC served as a basis for the Nevada court, which interpreted the CFTC’s jurisdiction as superseding the state’s under the Commodity Exchange Act. As a result, Kalshi’s federally legal and regulated status overrides Nevada’s state laws.
New Jersey’s court agreed with Nevada’s interpretation of the Commodity Exchange Act.
More battles to fight ahead
Kalshi may have received favorable rulings from district courts in Nevada and New Jersey. Still, its fight continues, with seven other states taking action against its sports markets in some fashion.
Illinois, Maryland, Montana and Ohio have also served C&D letters to Kalshi. Kalshi has filed a lawsuit against the Maryland Lottery and Gaming Control Commission and filed a motion for injunction. The hearing is scheduled for May 29.
Massachusetts and Michigan have open investigations into Kalshi, and Tennessee regulators asked the federal government to get involved and shut down the service entirely.
