State Regulators Battle with Kalshi Nationwide

Kalshi's lawyers are busy nationwide as they battle states on multiple fronts. 

The long-simmering jurisdictional battles reached a peak in New Jersey on Wednesday as state officials filed a formal petition for a writ of certiorari with the Supreme Court, asking the nation's highest court to decide whether federally overseen prediction market apps can bypass state sports betting laws. 

The Supreme Court filing arrives as numerous states take enforcement actions against Kalshi. Michigan judges issued a preliminary injunction forcing the operator to continue geo-blocking sports event contracts under threat of massive daily fines, while Kentucky Attorney General Russell Coleman moved to keep his state's battle in local courts, rejecting Kalshi's attempts to claim federal preemption under the CFTC. 

New Jersey petitions the Supreme Court

The New Jersey sports betting market famously helped overturn the Professional and Amateur Sports Protection Act (PASPA) in 2018, paving the way for state-by-state sports betting nationwide. Once again, the state is looking to lead the way in shaping nationwide gambling jurisprudence. After a Third Circuit ruling shielded Kalshi from state gaming laws, the state has asked the Supreme Court to settle the issue. This path seemed especially likely after the Ninth Circuit ruled just days ago that the issue fell under state jurisdiction. 

According to court filings submitted to the Supreme Court, New Jersey framed the central question of federal preemption as a vital sovereignty issue:

"The petition asks whether the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Commodity Exchange Act prevent states from applying their sports-gambling laws to bets made within their borders when the contracts are offered on a market registered with the Commodity Futures Trading Commission."

Michigan and the threat of daily fines

In the Great Lakes State, things are heating up. Earlier this summer, a federal judge in Michigan handed Polymarket a significant defeat, ruling that wagers tied to sporting events do not qualify as swaps under the jurisdiction of the Commodity Futures Trading Commission (CFTC).

Weeks later, Kalshi has begun blocking Michigan users from placing sports-related trades on its platform after a state judge ruled against the prediction market company in an ongoing legal dispute.  Ingham County Circuit Court Judge Rosemarie Aquilina issued a temporary restraining order on June 29 that bars the New York-based company from offering sports event contracts to residents in the Michigan sports betting market while the underlying lawsuit works its way through the court system. 

The most recent injunction impels Kalshi to continue geo-blocking the contracts, with the threat of a $500,000 USD daily fine as the punishment.

Kentucky blocks move out of local courts

The Bluegrass State is fighting legal battles with both Kalshi and Polymarket, as well as retail trading partners such as Coinbase, Robinhood, and Webull.

The lawsuits allege that the platforms are violating the Kentucky sports betting market gambling statutes. Kalshi tried to move the state enforcement action to federal court, arguing that federal commodity laws supersede state gambling enforcement. However, Kentucky prosecutors filed opposition motions to block the removal, insisting that state courts retain jurisdiction over consumer protection and gambling enforcement within state borders.  

Speaking to The Washington Times, Kentucky Attorney General Russell Coleman rejected the argument that event contracts are merely financial tools:

"They dressed up gambling in financial language, but the underlying product is unchanged. We want them to be regulated. We want the ability to protect our people."

The AG has rejected Kalshi's attempts to move the issue out of local courts.