A federal district judge in the state of Tennessee has granted prediction market operator Kalshi’s motion for a preliminary injunction against orders to cease its operations in the region by the state regulator.
Previously, the state of Tennessee ordered Kalshi to cease offering its sports events contracts in the state via a cease-and-desist letter with which the prediction market operator did not comply.
Instead, Kalshi filed a countersuit via motion for a preliminary injunction against the order, arguing that its event contracts fall under the sole regulatory jurisdiction of the Commodity Futures Trading Commission (CFTC) at federal level. That same injunction has now been approved by a federal judge in the state.
The basis for the approval is centred around the court’s conclusion that Kalshi’s sports-related events contracts are, indeed, ‘swaps’ and not a form of sports betting. Evidently, Tennessee’s argument that Kalshi is in fact an unlicensed sportsbook offering sports wagering in direct contradiction with state law has been effectively rendered moot by this conclusion, gifting Kalshi its first legal battle at state level in some time following losses for the operator in similar recent cases in Maryland, Massachusetts and Nevada.
In all three of the above-mentioned cases, each respective state did not draw primary focus on the narrow definition of ‘swaps,’ as the state of Tennessee did, but rather utilized the congressional intent as the cornerstone of its opposition to Kalshi. As observed in Maryland, the state court concluded that Kalshi could simply obtain a Maryland sports wagering license while continuing to operate as a CFTC-regulated entity – a conclusion supported by Maryland Attorney General Anthony Brown.
Now an excerpt from the Tennessee ruling pertaining to the regulatory jurisdiction of ‘swaps,’ reads: “The court finds that Kalshi is likely to succeed on the merits because sports event contracts are ‘swaps’ and conflict pre-emption applies.”
This conclusion juxtaposes the one found by the District Court of Colorado, where Kalshi’s preliminary injunction was dissolved after the court concluded its sports events contracts could not be defined as ‘swaps’
