A federal judge reversed a crucial court win for prediction market platform Kalshi, ruling on Tuesday that contracts based on sporting event outcomes are not subject to the Commodity Futures Trading Commission (CFTC).
Judge Highlights Kalshi’s ‘Strained Reading’ Of CEA
A preliminary injunction barring state regulators from labeling Kalshi’s sports event contracts as unlawful gambling was revoked by a Nevada court, according to Daniel Wallach, a sports betting and gaming lawyer.
In the ruling, U.S. District Judge Andrew Gordon noted that outcomes of sporting events “are not swaps and thus do not fall within the CFTC's exclusive jurisdiction.”
Gordon added that Kalshi’s interpretation is based on a “strained reading” of the “convoluted” Commodity Exchange Act and that it would “upset decades of federalism” covering gaming regulations.
Kalshi Files To Stay The Appeal
Kalshi filed an emergency motion for a stay, pending appeal of the order, stating that it “faces a threat of imminent criminal enforcement by Nevada authorities.”
The Debate Around Sports Betting
This ruling comes in the wake of a New York State legislation that sought to ban sports-related prediction markets. The bill sought to ban betting on individual events or incidents within a larger sporting event, while predictions tied to the overall winner of a sports tournament would be permitted.
Kalshi, a federally regulated prediction market startup, had seen its valuation soar to $11 billion after reportedly securing a massive $1 billion funding round. The platform’s total trading volume has exceeded $18 billion as of this writing, according to Dune Analytics.
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