Judge Denies Kalshi’s Request For Preliminary Injunction in Utah

• U.S. District Judge Robert J. Shelby today denied Kalshi’s motion for a preliminary injunction in Utah
• Kalshi filed a lawsuit against Utah Gov. Spencer Cox (R) and Attorney General Derek Brown earlier this year
• The court ruled the Commodity Exchange Act relied upon by Kalshi does not preempt Utah’s ability to enforce its anti-gambling laws

A federal judge today denied Kalshi’s motion for a preliminary injunction against Utah, ruling that its reliance upon the Commodity Exchange Act does not preempt the state’s ability to enforce its anti-gambling laws.

U.S. District Judge Robert J. Shelby today denied Kalshi’s motion for a preliminary injunction after the prediction market operator filed a lawsuit earlier this year to prohibit the state from enforcing its anti-gambling laws against its event contract offerings..

“Accordingly, the court concludes State regulation of its gambling laws does not frustrate the CEA’s purpose,” he wrote.

Suing Utah to Avoid Prohibitions

A Kalshi spokesperson told Sports Betting Dime the company had no comment on today’s decision.

Kalshi took action against the state in February following alleged comments from Gov. Spencer Cox (R) and Attorney General Derek Brown, in which the prediction market company said the two publicly expressed opinions that Kalshi was operating illegally under Utah’s anti-gambling laws and would likely take legal action against the company for its offerings.

Kalshi noted multiple times in its lawsuit against that it is taking action before the state can take legal action against the company. Kalshi pointed to recent comments made by Gov. Cox in a Bloomberg article in which he said “I think you’re going to see 50 states suing these guys in one way or another” and that businesses like Kalshi are “illegal in Utah and will continue to be so.”

They also expressed concern over a recent op-ed written by Brown in Deseret News, in which the attorney general reference Kalshi by name and “stated he has a plan to address prediction markets operating in the state.” The lawsuit also believes that Brown’s views in the op-ed clearly show he believes their offerings to be illegal.

Kalshi, in the lawsuit, claimed it tried to contact Utah’s attorney general to inquire if the state was preparing to take action against the company for its prediction market services, but its inquiries were never returned.

“Kalshi is a federally designated derivatives exchange, subject to the CFTC’s exclusive jurisdiction. It offers consumers the chance to trade in many types of event contracts. These contracts are subject to exclusive federal oversight, and—critically—they are lawful under federal law. Thus, they are also lawful under Utah’s own anti-gambling laws which provide a carveout for “lawful business transaction[s],’” Kalshi noted in it lawsuit.

Judge Denies Preliminary Injunction

Shelby wrote in today’s decision that state regulation of its gambling laws does not prevent the Commodity Futures Trading Commission (CFTC) from “serving the public interest in regulating derivates markets, preventing price manipulation, ensuring financial integrity, protecting market participants, and promoting innovations.”

Kalshi did not meet its burden to prove otherwise, he wrote.

“The court agrees that enforcement of State gambling laws is not inconsistent with the CFTC’s regulation and oversight of derivatives markets. Congress is aware that some States permit gambling while others do not,and the CEA explicitly provides for State jurisdiction. Additionally, § 16(e)(2) explicitly provides for State regulation of its gaming laws in all but a few specified cases. And, contrary to Kalshi’s contention, the application of § 16(e)(2) is not limited to off-DCM transactions. Section 2(d) specifically states that § 16(e)(2) applies to swaps. Section § 16(e)(2) makes clear that Congress intended States to have the power to regulate its swaps involving gaming except in certain specified situations,” Shelby wrote in his ruling.

Same Issue at Play in Lawsuit

Kalshi’s lawsuit against Gov. Cox and Brown – and all of its lawsuits against state gaming commissions – revolves around the central question of who regulates sports event contracts, and prediction markets, in general.

Companies such as Robinhood, Kalshi, and Crypto.com believe that state regulatory bodies do not have the right to intrude on the government’s “exclusive” authority to regulate prediction market, filing lawsuits in New Jersey, Nevada, and Maryland to defend its practices. These companies believe the CFTC is the only regulatory body that can legally block contracts from being offered to customers.

State gaming regulators maintain the markets need to be beholden to regulations, taxes, and license fees that sports betting and gaming operators are required to follow.

The prediction market companies believe their offerings are not required to comply with state laws, as they have been preempted by the CEA.