The emergency motion filed by Kalshi to keep its sports event contracts alive in Massachusetts was denied by a Superior Court judge, meaning that the company must pull its sports event contracts in the Bay State within 30 days.
Judge Christopher Barry-Smith denied Kalshi’s emergency motion little more than two weeks after granting Massachusetts a preliminary injunction, which Kalshi argued would cause it “irreparable harm” as a result of not being able to offer sports event contracts in Massachusetts.
Barry-Smith’s order confirmed a 30-day implementation period for Kalshi to comply with the preliminary injunction.
Kalashi must geolocate out Massachusetts users
Last month, Barry-Smith granted the preliminary injunction following a request by Massachusetts Attorney General Andrea Campbell, who sued Kalshi in state court alongside the Massachusetts Gaming Commission. Campbell filed against Kalshi for allegedly circumventing state laws by offering sports event contracts that the state said equates to “illegal sports betting.”
Kalshi is now required to leverage geolocation technology to prevent residents and visitors in Massachusetts from accessing sports event contracts in the state within 30 days of the new order.
“Kalshi is, of course, welcome to seek a stay from the Appeals Court, which presumably can be decided within the implementation period,” wrote Barry-Smith. The company has already said it intends to appeal the decision but while that process unfolds, it must comply by blocking access to sports contracts in Massachusetts.
Judge notes risk of relying on CFTC regulation
In its emergency motion, Kalshi argued that its sports event contracts fall under the purview of the Commodity Exchange Act (CEA), which it said preempts all other laws concerning swaps and derivatives and allows the Commodity Futures Trading Commission (CFTC) to regulate them. Kalshi also pointed to the CFTC’s new approach toward event contract regulation, which calls for state laws not to interfere with federal CFTC jurisdiction.
Barry-Smith determined in his denial that the CEA does not prohibit state regulation of gambling. He also stated that Kalshi knowingly took the risk of offering sports event contracts in Massachusetts by relying on CFTC regulation.
“Kalshi adopted its business model—relying on CFTC regulation of ‘swaps’ to offer nationwide sports betting in contravention of state gaming laws—with eyes wide open; it plainly must have appreciated the risk—or likelihood—of an order like this preliminary junction. Being a sophisticated entity, it presumably prepared for that risk,” the judge wrote.
Kalshi’s ‘irreparable harm’ argument
In Barry-Smith’s motion to deny Kalshi’s emergency stay, the judge disputed Kalshi’s “irreparable harm” claim.
“Economic loss alone does not usually rise to the level of irreparable harm which a party must establish to obtain a preliminary injunction,” adds Barry-Smith in the order.
Kalshi previously raised geolocation concerns, asserting that it would be required to make annual investments that can reach “millions of dollars” in order to geolocate out Massachusetts users. In its emergency stay, Kalshi argued that its technology stack does not have the capability to quickly implement a geolocation system.
Back in September, the CFTC sent a notice to all registered event contract providers and suppliers to prepare for all “foreseeable conditions that may result from facilitating the trading and clearing of sports-related event contracts for customers, market participants, and clearing members.”
Kalshi’s legal battles in other US markets
Kalshi has ongoing court proceedings in several other states including Nevada. There, Judge Andrew Gordon granted Kalshi a preliminary injunction and temporary restraining order (TRO) last April, allowing the company to continue to offer its sports event contracts in Nevada after it filed suit against the Nevada Gaming Control Board following a cease-and-desist order from the regulator. However, he announced in November he was dissolving that preliminary injunction.
Kalshi is also going toe-to-toe in court in other states. Last year, the company was denied a TRO to keep its sports event contracts alive in Maryland after receiving a cease-and-desist order from Maryland Lottery and Gaming. In that case, Kalshi also raised geolocation concerns and argued that its sports event contracts fall under CFTC regulation. Kalshi also filed suit against the New Jersey Division of Gaming Enforcement and the Tennessee Sports Wagering Council after calls to pull its sports event contracts from the markets.
While other states filed C&Ds, leading to Kalshi suing them in court, Massachusetts was the first state to go on the offensive by filing suit against Kalshi over sports event contracts.
