A US federal judge named Aleta Trauger gave Kalshi a temporary restraining order against Tennessee, saying that the CFTC was empowered to oversee its sports event contracts.
A US federal judge in Tennessee temporarily blocked the state from enforcing its gambling laws against prediction markets operator Kalshi’s sports event contracts.
On Thursday, Judge Aleta Trauger of the US District Court for the Middle District of Tennessee made a decision that lets Kalshi keep issuing sports-related event contracts to people in Tennessee while it fights the state’s regulators in court.
Trauger said that Kalshi is likely to win its case, as federal commodities law stops Tennessee from trying to regulate its sports markets as illegal gambling.
The court decided that Kalshi’s contracts for sports events are “swaps” under the Commodity Exchange Act, which gives the US Commodity Futures Trading Commission (CFTC) exclusive authority over them. The court also stated that conflict preemption principles likely block Tennessee’s attempts to enforce the law.
The injunction only affects the state officials named, and the Tennessee Sports Wagering Council was thrown out because of sovereign immunity. Kalshi was told to pay a $500,000 bond.
Part of a broader state-federal regulatory clash
The Tennessee case is part of a bigger fight in the US about how to handle event contracts.
A previous temporary restraining order from Trauger had already stopped the enforcement of Tennessee’s cease-and-desist letter, which said that Kalshi was running unlicensed sports betting, told it to stop offering sports event contracts to customers in Tennessee, void those contracts, and give back deposits. It also threatened fines and more legal action.
Kalshi has also gone to federal court in other jurisdictions, including as Nevada, New Jersey, and Connecticut, to stop cease-and-desist orders against its event markets. Courts have come to different decisions about whether to provide preliminary relief.
CFTC moves to assert exclusive jurisdiction
The order also comes at a time when the federal government is changing, as the CFTC tries to take control of prediction markets.
On Tuesday, CFTC Chair Michael Selig sent a video message saying that the agency had filed a “friend-of-the-court” brief to protect its “exclusive jurisdiction” over prediction markets. He also warned state officials that the commission would meet them in court if they tried to weaken federal oversight of these derivative markets.