Kalshi files preemptive lawsuit against Iowa regulators, cites risk of enforcement action

Kalshi has filed a lawsuit in the US District Court of Iowa against Attorney General Brenna Bird and the Iowa Racing & Gaming Commission, believing there is a “substantial risk” of Bird filing her own enforcement action against the operator on behalf of the Commission. 

According to the lawsuit, Kalshi had recently met with Bird to hold what it believed were going to be discussions centered around a tax bill currently under consideration by Iowa legislature, but were instead “greeted by a panel of attorneys…who proceeded to ask a series of pointed questions challenging whether Kalshi’s federally regulated offerings ran afoul of Iowa state law.”

Following the meeting, Kalshi reached out to representatives of the Iowa Attorney General for assurances she did not intend to pursue enforcement action against the operator. 

Rather than provide such confirmation, the representative stated “we will not give any assurances about potential future enforcement.”

Kalshi believes federal law preempts Iowa from regulating its event contract trading offerings under state legislation, and is rather subject to the “exclusive jurisdiction” of Commodity Futures Trading Commission (CFTC) as a designated contract market. 

The lawsuit follows similar efforts made by Kalshi in Utah, where the operator filed legal action in US District Court following what was described as an “intrusion” into the federal government’s authority to oversee prediction market platforms regulated by the CFTC. 

On February 17, Utah Governor Spencer Cox publicly criticized CFTC Chairman Michael Selig over the legality of sports-related prediction markets, rejecting the CFTC’s position that such markets fall under federal derivatives regulation.

The lawsuit also names Utah Attorney General Derek Brown and three fellow legislative leaders, as Kalshi is seeking both a preliminary and permanent injunction from the court, as well as declaratory relief.