The explanation of the ruling in favor of Kalshi’s request for a temporary restraining order in the Nevada District Court offered some fuel for the financial firm’s other legal actions, as Chief Judge Andrew Gordon has filed his full ruling.
Kalshi first filed suit in Nevada after state gaming regulators sent them a cease and desist regarding offering sports contracts in the state.
NV judge says law is clear that CFTC is in charge
In his writings, Gordon noted not only that taking Kalshi’s sports contracts down in Nevada would cause an undue burden for the company but also that he thought Kalshi had a very clear case and a strong chance to succeed in court. He looked closely at the Commodities Exchange Act (CEA) and disagreed with the Nevada Gaming Control Board (NGCB) that they controlled oversight of sports betting in the state and, accordingly, could determine whether or not Kalshi’s sports-related event contracts violated state law.
“Section 2’s plain and unambiguous language grants the CFTC exclusive jurisdiction over accounts, agreements and transactions involving swaps or contracts of sale of a commodity for future delivery that are traded or executed on exchanges that the CFTC has designated…,” wrote Gordon.
“Nevada regulatory agencies thus have no jurisdiction to decide that Kalshi’s conduct violates state law where, at least at present, those activities are legal under federal law.”
Gordon also agreed that the cost to geofence Nevada contracts and potentially risk Kalshi’s status with the CFTC merited letting them keep offering sports contracts in the state.
Judge acknowledges trouble could be ahead for Kalshi
While Gordon said he believed Kalshi is likely to succeed in court, he did acknowledge that the company might be playing with fire over the long term.
“Kalshi is, in some sense, proceeding at its own risk and creating its own harms. Things might turn out differently with election contracts if the D.C. Circuit rules against Kalshi or if the CFTC takes action against Kalshi’s sports contracts,” he noted. “But for now, I will preserve the status quo, which is that these contracts are legal under federal law.”
Gordon is referencing the case that currently sits in the First Circuit Court, in which the CFTC and Kalshi are at odds over election contracts. However, with the change in administration at the federal level, opinions within the CFTC likely shifted regarding the validity of such contracts, especially given past opinions of President Donald Trump’s nomination for chair of the organization, Brian Quintenz. Quintenz is currently a board member for Kalshi.
In the meantime, the response from the New Jersey Division of Gaming Enforcement (DGE) in a similar suit regarding Kalshi’s request for a court injunction is due April 18, with Kalshi’s response due April 23.
The CFTC will hold a roundtable related to sports events contracts on April 30.
