TL;DR:
- A federal judge in Tennessee granted Kalshi a preliminary injunction blocking the enforcement of state sports betting laws against the platform’s event contracts.
- The court concluded that Kalshi’s sports event contracts likely qualify as swaps under the Commodity Exchange Act, placing them under exclusive federal jurisdiction.
- The ruling contrasts with mixed outcomes: Maryland and Nevada denied the injunction, while New Jersey sided with Kalshi.
A federal district judge in Tennessee granted on Thursday a preliminary injunction in favor of Kalshi, blocking state officials from enforcing local sports betting laws against the platform’s event contracts. The decision was signed by U.S. District Judge Aleta A. Trauger, who concluded that the platform is likely to demonstrate that its contracts qualify as swaps under the Commodity Exchange Act (CEA), which would place them under exclusive federal jurisdiction and displace state regulation.
Tennessee had sent Kalshi a cease-and-desist letter threatening action for operating without a license under the Tennessee Sports Gaming Act. In response, the platform filed a lawsuit last month.
The “Outcome” vs. “Occurrence” Divide
The central argument put forward by state authorities held that Kalshi’s contracts depend on the “outcome” of a sporting match, not the “occurrence” of an event as required under federal law. Judge Trauger rejected that distinction, stating that the result of an event can also be an occurrence. She also accepted the platform’s argument that the “indirect consequences” of sporting results —such as increased merchandise sales following a victory— satisfy the CEA requirement that swaps be tied to financial or economic consequences.
The court further determined that simultaneously complying with state licensing rules and Commodity Futures Trading Commission regulations would be impossible, which would frustrate federal oversight of derivatives markets.
Kalshi’s Victory Is Not Universal
Appellate litigator Andrew Kim noted that the ruling diverges from the decision by Judge Gordon in Nevada, where the injunction was denied. “Reasonable minds are going to differ on these issues, so we’re probably headed to the Supreme Court.”
Maryland and Nevada have rejected similar injunctions, while New Jersey sided with Kalshi. Additional motions remain pending in Ohio, New York, and Connecticut. Earlier this week, the CFTC filed an amicus curiae brief in the Ninth Circuit in a related case involving Crypto.com and Nevada, reaffirming its “exclusive jurisdiction” over prediction markets as commodity derivatives. Kalshi, meanwhile, remains the largest prediction market exchange by volume, having processed more than $9.5 billion in January.
