Kalshi's recent legal troubles continued as a federal judge in Iowa dismissed the company's request to block the state's gambling laws. Judge Stephen Locher of the U.S. District Court for the Southern District of Iowa denied Kalshi's motion for a preliminary injunction that would have prevented Iowa's attorney general and gaming regulators from initiating legal action against the prediction market operator. Locher's ruling noted that Kalshi was unlikely to convince a court that its sports markets qualified as "swaps" under federal law, aligning with the opinions of several judges in recent rulings at both state and federal levels.
The judge emphasized the burden on Kalshi to demonstrate that injunctive relief was warranted and concluded, "this is nowhere close to enough, particularly when balanced against the interests of state officials and the general public in the enforcement of duly enacted gambling laws."
This ruling marked a challenging day for Kalshi, as it faced another setback just hours earlier when the Tenth Circuit Court of Appeals also rejected its request for an injunction to prevent Utah from enforcing its gambling laws. This followed a district court's decision favoring the state.
The root of Kalshi's legal predicament in Iowa traces back to March, when the company sought an injunction after a meeting between its director of state relations and Iowa Attorney General Brenna Bird's team. Bird later described the meeting as having the tone of a deposition, which raised concerns that the state might act on its existing gambling laws against Kalshi.
Judge Locher pointed out that Kalshi failed to explore other avenues to understand the state's position on its sports offerings before pursuing the injunction. He remarked that Kalshi likely understood the risk of its products being classified as illegal gambling, especially given the company's own advertising description of itself as "the first app for legal sports betting in all 50 states."
The judge also criticized Kalshi's approach, noting, "it should have proceeded with greater caution." He asserted that while Kalshi's filings claimed potential irreparable harm, they did not provide sufficient evidence to support the company's assertions about the risks linked to the loss of its contracts.
In its defense, Kalshi mentioned it had nearly 42,000 users in Iowa and millions of dollars in open contracts. However, Locher questioned the clarity of this claim, stating that Kalshi did not specify how many of these contracts were related to sports or would be affected by any enforcement action. He pointed out the lack of concrete examples illustrating how the company's contracts would suffer from market fluctuations, further undermining Kalshi's arguments.
