Kalshi Fires Back At New Jersey With Reply In Federal Court
Kalshi replied in federal court to New Jersey’s assertion that the prediction market platform is offering illegal sports betting in the state.
It’s the latest development stemming from New Jersey regulators telling Kalshi to stop offering sports event contracts in the state and Kalshi’s subsequent lawsuit. Kalshi is asking for a preliminary injunction.
Kalshi led its reply to the US District Court for the District of New Jersey by noting that a Nevada court had granted its request for a preliminary injunction under “almost identical issues.”
“Defendants here barely acknowledge this decision, but it confirms that a preliminary injunction is warranted. Kalshi should not be required to incur irreparable harm while it litigates here after another federal court granted preliminary relief,” the brief continued.
You can read the whole brief here:
How we got here in Kalshi vs. New Jersey
Here’s the quick backstory on the case:
Kalshi started offering sports events contracts in January.
Kalshi expanded to allowing betting on single college basketball games in March.
New Jersey joined Nevada in sending a cease-and-desist to Kalshi in late March, alleging that it was offering illegal sports betting in the state.
Kalshi responded with a lawsuit, asking the court to prevent New Jersey from enforcing the C&D.
New Jersey responded on April 18 with a brief.
More from Kalshi’s reply brief
“On the merits, there is overwhelming evidence that Congress in the Commodity Exchange Act sought to preempt state regulation of trading on designated contract markets (“DCMs”) like Kalshi. Indeed, this was the principal purpose of the 1974 amendments, as confirmed by every conceivable marker of legislative intent. Defendants offer no plausible contrary reading of the statutory grant of ‘exclusive jurisdiction’ to the CFTC over trading on DCMs.”
“Federal law preempts state regulation of trading on DCMs; it leaves state regulation of sportsbooks and casinos untouched. And DCMs are among the most heavily regulated entities on Earth; the CFTC’s 23 Core Principles require DCMs to maintain extensive safeguards. The question is not whether Kalshi should be regulated, but rather by whom. The answer is clear: The CFTC has ‘exclusive jurisdiction.’”
“Defendants’ cease-and-desist deadline expires on April 30, and Kalshi respectfully requests that the Court grant a preliminary injunction by that date.”
The economic case for sports event contracts
Again, from the reply:
“To take one example related to Kalshi’s contract on the winner of the 2025 Masters: When Rory McIlroy won in a sudden-death playoff, television viewership rose by 33% over 2024, with enormous financial consequences for CBS and advertisers.”
“To take another (closer-to-home) example: When Saint Peter’s University in 2022 made a historic run to the Elite Eight of the NCAA Basketball Tournament, its run had millions in financial implications for the school, its community, and its conference. These are actual and significant financial consequences; they easily qualify as ‘potential’ economic consequences under the CEA. 7 U.S.C. § 1a(47)(A)(ii).”
My take on this part of the argument — not from a legal standpoint, just from a smell test standpoint:
I can almost buy The Masters argument, but the winner of the tournament isn’t what created the “enormous financial consequences.” The ratings and the interest in the tournament came from McIlroy being in the lead, as he was chasing a career grand slam of the four major golf tournaments. Whether he won or lost didn’t really change the calculus for CBS or advertisers by the end of the tournament. McIlroy just needed to be there. A market for “Will Rory McIlroy be in the top 5 heading into the final round” or “in the lead” would actually have been a far better market for an economic use case.
In the college sports example, I guess we’re to believe it would have been a good idea if the school, its athletic program or its conference could bet on St. Peter’s opponents as a hedge? Yikes.
Early legal analysis
More to come on this front.
