Though a Massachusetts judge heard arguments from both Kalshi and the state’s attorney general on Tuesday, it will be a month or so before the parties, and the industry, hears back.
Suffolk County Civil Court Judge Christopher Barry-Smith heard oral arguments on Kalshi’s requested preliminary injunction that would keep the financial site online and offering sports-related event contracts in the state as the case moves forward.
In its request and its motion to dismiss, Kalshi argued that complying with the state’s cease and desist could topple its entire financial ecosystem. The site also suggested that Attorney General Andrea Campbell’s suit is attempting to offline every type of event contracts, not just sports-related ones.
MA AG has little patience for Kalshi’s arguments
In response to the motion, Campbell’s office took an incredulous tone with many of Kalshi’s arguments, including its claims about the Commodity Exchange Act (CEA) and the Dodd-Frank Act of 2010.
“Kalshi claims that Congress impliedly preempted Chapter 23N in 2010, legalizing sports betting nationwide on Commodity Futures Trading Commission (“CFTC”)-regulated exchanges. But Congress does not silently preempt areas of traditional state authority like gambling and sports wagering ever. And it certainly did not do so in a statute whose purpose was to address the causes of the Great Recession, not to create a nationwide sports-betting market.”
The office also argued that many of the cases Kalshi cited were done inaccurately or out of context to paint an inaccurate picture of what precedent has been set around the hotly contested subject.
“At bottom, Kalshi’s attempts to avoid the consequences of its lawbreaking by asserting preemption rely on atextual, ahistorical, and unprecedented claims,” the response brief noted.
Debate over whether or not CFTC is doing its job
The state also pointed out what Kalshi failed to do so when discussing the onerous burden of geolocation, which is that the CFTC cautioned DCMs to be ready with a plan to comply with states sending cease and desists and courts potentially ordering sites to vacate certain markets.
The CFTC and its enforcement, or lack thereof, remains a contentious point in several cases, including this one. Kalshi charged that Massachusetts’ real issue is with the regulatory body, which has yet to conduct any sort of regulatory review of the self-certified sports contracts. Kalshi, as it has in other cases, continues to argue that Massachusetts should be arguing this case against the CFTC, not the groups it regulates.
In its response, Campbell’s office addressed this notion, which Kalshi called a “collateral attack” on CFTC oversight. In addition to pointing out that Nevada rejected this argument, suggesting it was putting the cart before the horse, the office made it clear it does not believe the CFTC is involved in this litigation at all.
“The Commonwealth is enforcing its laws. The relief the Commonwealth seeks would leave every CFTC rule, order, and registration intact.”
Campbell’s office went on to point out that just because banks or airlines are regulated by federal bodies and held to federal regulations does not mean they are not culpable for state laws they might violate.
In its response to the state’s response, Kalshi balked at that suggestion.
“If the Commonwealth wishes to take aim at event contracts traded on such a market, then it can do so only by establishing that the event contracts are improperly listed there. In other words, the Commonwealth must do the very things that it boasts it has not done-challenge the CFTC’s own decision to permit sports-event contracts to trade.”
Judge Barry-Smith will take all of those arguments into consideration, as well as the arguments made in court on Tuesday as he considers his decision, which is expected sometime in January.
