A second court has ruled in favor of Kalshi when it comes to the push to keep offering sports event contracts online. A New Jersey District Court judge has concurred with a ruling in Nevada that Kalshi stands a reasonable chance of success in its suit against the New Jersey Division of Gaming Enforcement (DGE).
Kalshi filed suit against the regulator earlier this month after the DGE sent a cease and desist asking the company to stop offering event contracts on individual sporting events.
Judge Edward S. Kiel granted Kalshi’s request for a temporary injunction and noted that the decision was in part influenced by the decision in Nevada. The judge agreed that the costs Kalshi would incur atempting to geolocate New Jersey residents out of the offering would cost tens of millions of dollars.
Judge implied Robinhood impacted his decision
The judge also referenced at least one Kalshi partner negatively imapcted by the DGE’s cease and desist letter. While not named directly, Kiel appeared to be referencing Robinhood, which ceased offering NCAA basketball tournaments after DGE sent a cease and desist last month.
As for the merits of Kalshi’s argument, the crux of the case is the language within the Commodity Exchange Act (CEA). Kiel agreed with the Nevada ruling that the plain language of the law puts control over these markets in the hands of the Commodity Future Trading Commission (CFTC). The granular debate over the two sentences of the law is central to the argument, but was not the only reason Kiel believes Kalshi stands a good chance of succeeding in court.
Other arguments raised by New Jersey fell short in the judge’s estimation as well.
I am persuaded that Kalshi’s sports-related event contracts fall within the CFTC’s exclusive jurisdiction and am unconvinced by defendants’ arguments to the contrary,” he wrote.
For example, New Jersey Attorney General Matthew Platkin argued sports do not qualify as events capable of “swaps” because they don’t have economic consequences. Kalshi offered a couple of examples, such as St. Peters’s Cinderella run in the 2022 March Madness tournament as an example of direct fiscal impact based on sports performance since each round the team advanced earned millions for both the school and the conference.
Maryland judge still needs to rule on injunction
The judge also pointed out that, if these contracts were counter to public interest, the CFTC would have intervened, which they have not to date. Since the group apparently canceled this week’s roundtable, no action appears to be on the horizon.
In the meantime, Kalshi is still waiting to see if a court in Maryland will toe the line of the other two decisions, as the company has filed suit against Maryland Lottery & Gaming there after the regulators similarly sent a cease and desist.
