A federal judge in Tennessee has temporarily stopped state regulators from taking action against prediction markets platform Kalshi, which sued the state after it was ordered to stop offering contracts for sporting events.
In Monday’s order, Judge Aleta Trauger supported Kalshi’s earlier request for a preliminary injunction and short-lived restraining order against the Tennessee Sports Betting Board and the state’s attorney general pending the conclusion of the court case.
The judge said Kalshi “will suffer irreparable harm and loss” as a result of the regulator’s actions and that the company is “likely to succeed on the merits of its claims and its rights are likely to be adversely affected” unless the regulator is stopped.
The Tennessee Sports Betting Board sent cease-and-desist letters to Kalshi, Polymarket and Crypto.com on Friday, ordering them to stop offering contracts for sporting events in the state.
The regulator accused all three of offering sports betting without a license. It ordered them to stop offering products in Tennessee, void all contracts and refund all users in the state by January 31, threatening fines of up to $25,000 for each infraction.
Kalshi is suing Tennessee, claiming overreach
Shortly after receiving the letter, Kalshi sued the Sports Betting Board; its chairman, William Orgen; and its executive director, Mary Beth Thomas, and state Attorney General Jonathan Skrmetti.
The company argued that as a federally designated derivatives exchange, it was under the “exclusive jurisdiction” of the Commodity Futures Trading Commission.
“Tennessee’s intention to regulate Kalshi violates the federal regulatory framework established by Congress to regulate derivatives on designated exchanges,” Kalshi said.
Related: CFTC sends Bitnomial a no-action letter, clearing the way for event contracts
Kalshi has made similar arguments in lawsuits she has filed against other state regulators, which also issued cease-and-desist letters to the company and some of its competitors, arguing that prediction marketplace platforms must be licensed at the state level.
Courts in Nevada and New Jersey sided with Kalshi to prevent state regulators from taking action until the company’s lawsuits were resolved, but a judge in Maryland denied Kalshi’s request for a short-lived block.
Tennessee’s lawsuit against Kalshi has been frozen pending a preliminary injunction hearing scheduled for Jan. 26, and the platform can continue to operate in the state.
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