A US federal judge in Tennessee has temporarily blocked the state from enforcing gaming laws against prediction markets operator Kalshi’s contracts for sporting events.
The rulingissued Thursday by Judge Aleta Trauger of the U.S. District Court for the Middle District of Tennessee allows Kalshi to continue offering sporting event contracts to users in the state pending the outcome of legal proceedings against Tennessee regulators.
Trauger said Kalshi would likely succeed based on the substantive claim that federal commodity law thwarts Tennessee’s attempts to regulate sports markets as illegal gambling.
The court found that Kalshi’s contracts for sporting events constitute a “swap” under the Commodity Exchange Act, over which the law grants exclusive jurisdiction to the U.S. Commodity Futures Trading Commission (CFTC), and ruled that Tennessee’s enforcement efforts would likely be thwarted under the conflict prevention rules.
The order affects named state officials, the Tennessee Sports Betting Board itself was dismissed on sovereign immunity grounds, and Kalshi was ordered to post a $500,000 bond.
Long-term clashes with countries
The Tennessee case is another chapter in a broader dispute over the treatment of event contracts in the United States.
An earlier momentary restraining order issued by Judge Trauger had already halted enforcement of Tennessee’s cease and desist letter, which accused Kalshi of operating unlicensed sports betting, ordered him to stop offering sports event contracts to Tennessee customers, voided those contracts and refunded his security deposit, and threatened fines and further legal action.
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Kalshi similarly turned to federal courts in multiple states, including Nevada, New Jersey and Connecticut, in connection with cease-and-desist actions targeting Event Markets, and the courts reached divergent conclusions on whether to grant preliminary injunctive relief.
CFTC steps in to defend prediction markets
The order also comes in an evolving federal context as the CFTC seeks to assert primacy over prediction markets.
In a video message Tuesday, CFTC Chairman Michael Selig said the agency filed a friend-of-the-court brief to defend its “exclusive jurisdiction” over prediction markets, warning state authorities that the commission would meet them in court if they tried to undermine federal oversight of these derivatives markets.
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