Nevada District Court Judge Andrew Gordon has written his rationale for denying Crypto.com’s request for a preliminary injunction to keep offering sports-related event contracts in the state even though he previously granted Kalshi a similar concession.
Crypto.com followed Kalshi’s lead in Nevada and sued the state regulatory body, the Nevada Gaming Control Board (NGCB), when the group sent a cease and desist letter to the company asking it to cease offering sports-related contracts in the state.
In his ruling, Gordon noted his change in stance and took the time to explain why he ruled against one firm and not the other.
Definition of “event” is just too broad
At the heart of his argument were two words with definitions that became problematically broad for Gordon, “event” and “swap”.
“The Commodity Exchange Act (CEA) does not expressly delegate to the CFTC the exclusive power to decide what is a swap,” Gordon noted. “I therefore have the power to interpret the statute.”
Gordon began by trying to come up with an operational definition of event before concluding that Crypto.com’s assertion that the outcome of a sporting match is an event is too broad.
“Crypto’s proposed reading of the statute knows no limiting principle because anything could be defined as an event,” he noted. He also added that while the Kentucky Derby seems clearly to be an event and a swap on whether or not the event takes place makes sense but arguing who wins the race is an event is a bridge too far.
Judge says Congress didn’t intend such broadness
He also pointed out that the language of the CEA, which is the law Crypto.com says preempts state gaming laws, is written in a way that such a broad interpretation of the word event would be impossible, such as the text’s definition of a credit default swap.
Moreover, if a swap is a contract on an event and the CEA says only Designated Contract Markets (DCM) can broker swaps, this potentially creates a scenario where all state-level gmabling is illegal.
“That cannot be a proper reading of the statute because that would mean that all sports wagering must be done on a DCM, and not at casinos, as the CEA forbids nearly all swap dealing and trading unless done on a DCM, except for certain market participants, none of whom are casinos or the average sports bettor.”
Appeal could involve third Circuit Court in sports contracts
Since he felt Crypto.com was arguing for too broad a definition of swap, Gordon did not feel as thought the financial firm stood a chance of success on the merits of the case and denied the request for an injunction.
Crypto.com can appeal Gordon’s ruling, which would kick the case up to the Ninth Circuit. That would be the third Circuit Court considering a case related to sports contracts. There is a pending appeal in the Third Circuit from the New Jersey Division of Gaming Enforcement and Attorney General Matthew Platkin in a case against Kalshi. Elsewhere, Kalshi is appealing a Maryland District Court’s denial of its request for a preliminary injunction in the state in the Fourth District.
