Kalshi Wins Federal Injunction Against New Jersey Gaming Enforcement
In a significant legal victory, a federal judge in New Jersey has granted Kalshi, a derivatives exchange and prediction market operator, a preliminary injunction that halts the New Jersey Division of Gaming Enforcement from blocking the company’s operations in the state. This ruling, issued by U.S. District Judge Edward S. Kiel, comes on the heels of a similar win in Nevada, where U.S. District Judge Andrew P. Gordon ruled against the Nevada Gaming Commission.
At the heart of both cases is the issue of preemption, which questions whether federal law supersedes state regulations regarding sports betting. The judges concluded that state laws are preempted in Kalshi’s case, as established by the Supremacy Clause of Article VI, Clause 2 of the U.S. Constitution.
Kalshi began offering sports-related contracts in January, which included predicting outcomes in college basketball tournaments. However, New Jersey regulators contended that these activities violated the New Jersey Sports Wagering Act and other state laws. Kalshi countered that federal approval from the Commodity Futures Trading Commission (CFTC) preempts state authority.
Kiel agreed with Kalshi’s position, arguing that the CFTC holds exclusive jurisdiction over such contracts and has not prohibited them. Kalshi asserts that New Jersey’s regulations conflict with federal law, which aims to create uniform standards for futures markets.
Amidst these legal challenges, Judge Kiel highlighted Kalshi’s potential for irreparable harm if the injunction was not granted, citing credible threats of civil and criminal liability from New Jersey regulators. The state has the option to appeal Kiel’s decision to the U.S. Court of Appeals for the Third Circuit.
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