New Jersey Attorney General Matthew Platkin has submitted his opinion on the legality of sports event contracts to the court. While some of his arguments echo the arguments put forward in a similar case in Nevada, he also brought up new defenses to back up the claim that sports contracts require state gaming oversight.
New Jersey and Nevada are two states currently in pending litigation with Kalshi over the offering of sports-related event contracts. Kalshi began offering sports contracts in January of this year and several states, including Nevada and New Jersey, have responded with cease and desist letters, calling the offering unregulated sports betting. In turn, Kalshi filed suits against both regulators.
NJ says CFTC and state regulators not in conflict
“Like many other States, New Jersey has regulated gambling for over 125 years. Plaintiff KalshiEX, LLC thinks it is exempt from those laws simply because it offers sports wagers in a new format (called event contracts) on a market designated by the Commodity Futures Trading Commission (CFTC). Kalshi is wrong. There is no doubt that if the Commodity Exchange Act (CEA) applies to Kalshi’s sports wagers, Kalshi must comply with the CEA in order to list them on a CFTC-designated market. But it cannot do so in violation of state law,” Platkin’s response began.
Platkin began by taking issue with the idea that the CEA and New Jersey gaming laws are in conflcit with each other. He noted that, should Kalshi obtain a sports betting license, they could continue to offer the same things they are currently offering.
“The text of the CEA makes clear that Congress did not intend to preempt the field of regulation of derivatives trading on CFTC-regulated exchanges,” he argued.
Are event contracts even legally swaps?
Platkin alsoi questioned whether or not sports event contracts meet the CEA definition of “swaps” in the first place. Per the CEA swas are defined as anything that include:
“any agreement, contract or transaction….that provides for any purchase, sale, payment or delivery…that is dependant on the occurrence, nonoccurence or the extent of the occurence of an event or contingency associated with a potential financial, economic or commercial consequence.”
Like the Nevada case, Platkin used Kalshi’s own defense in the election contract case against it, noting that Kalshi pointed out that contracts around games fail to meet the standard of having an economic or commercial consequence. Platkin suggested that, should a sports contract be deemed a swap, any casino offering sports betting would be offering event contracts unregulated by the CFTC.
Platkin also cited the pending case regarding event contracts on elections to establish the CFTC’s own argument that the CEA doesn’t override state laws regarding election wagering.
Nevada already granted Kalshi injunction
Platkin also fought back against the notion that Kalshi would suffer irreparable harm and financial expense if it were to geofence New Jersey users out of sports contracts or cease operating in the state. However, New Jersey’s argument is that the courts have generally determined that financial burden necessary to be in compliance with laws are insufficient for an injunction.
The Nevada District Court has already sided with Kalshi in terms of a preliminary injunction and intervened saying that Kalshi could still offer contracts in the state while the case is litigated.
