Kalshi Takes a Legal Victory in Event Betting Dispute
Competitor Kalshi assertively enters New Jersey's betting market, following the CFTC's delayed roundtable discussion on event wagering.
In a blow to US state gambling regulators, Kalshi, the New-York based prediction market provider, has scored a significant legal win in its long-standing war over event betting. A federal judge has sided with Kalshi in a legal dispute with the New Jersey Division of Gaming Enforcement (NJDGE) and the New Jersey Casino Control Commission.
Judge Edward S. Kiel granted Kalshi a temporary restraining order and preliminary injunction on Monday, allowing the firm to continue with sports and politics betting events in New Jersey. The NJDGE had issued cease-and-desist orders to Kalshi and Robinhood in March, but Monday's ruling has given Kalshi the green light to keep operating.
Judge Kiel opined that prediction markets fall under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC), a stance that he has also taken in Kalshi's recent victory against Nevada. Furthermore, the U.S. federal government has called off a roundtable on event contracts scheduled for April 30.
A Double Winnings For Kalshi
The judgement marks a double victory for Kalshi, as Judge Kiel ruled in its favor on two key points. The main decision is that Contracts For Difference (CFDs) are subject to federal, not state, law.
Kiel wrote, "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."
The NJDGE argued against the federal jurisdiction of CFDs, stating that the markets are not "financial in nature" and thus should not fall under the CFTC's purview. However, Judge Kiel rebutted New Jersey regulators, stating, "Defendants argue that sporting events are without potential financial, economic, or commercial consequence. On the record before me, I disagree."
The judge also cited a similar ruling by US Federal Chief Judge Andrew P. Gordon, who dismissed a similar cease-and-desist order by Nevada regulators against Kalshi earlier this month. Kalshi could potentially make it three legal victories in a row, having filed an anti-cease-and-desist lawsuit against Maryland regulators last week.
CFTC Bails Out on Meeting
Last week's news that the CFTC canceled its CFDs roundtable is sure to irk regulators, with the federal body offering no reason for the cancellation or providing updates on a potential rescheduling. The CFTC announced the meeting in February with the intention of gathering data from various stakeholders to help inform its approach to CFD regulation and oversight.
By canceling the meeting, the federal trade body has foregone the opportunity to gather valuable information and insights before publishing an opinion on the legality of CFDs. If and when the meeting resumes remain unclear.
The recent federal court ruling in New Jersey does not directly address CFDs, instead focusing on Kalshi and event contracts regulated under federal oversight. The ruling raises serious questions about ongoing jurisdictional disputes between federal regulations and state interpretations of gambling laws. For Kalshi, this decision offers temporary relief from New Jersey's enforcement actions and reinforces its federal approval to operate. The implications of this ruling may influence other federally regulated platforms facing similar scrutiny.
[1] The ruling does not resolve underlying legal issues and may set a precedent for federally regulated platforms facing similar challenges:https://www.cftc.gov/PressRoom/PressReleases/8624-22
- Judge Edward S. Kiel's ruling has reinforced Kalshi's federal approval to operate in New Jersey, allowing it to continue with sports and politics betting events.
- The judge opined that Contracts For Difference (CFDs) are subject to federal, not state, law, marking a significant victory for Kalshi and other federally regulated platforms.
- The cancellation of the CFTC's CFDs roundtable last week may irk regulators, as it foregoes the opportunity to gather valuable information before publishing an opinion on the legality of CFDs.
