A federal judge in Utah ruled against Kalshi on Tuesday, denying the prediction market operator's request for an injunction to stop state officials from enforcing gambling laws. U.S. District Court Judge Robert Shelby stated that the federal law cited by Kalshi does not override Utah's authority to enforce its anti-gambling regulations. He characterized Kalshi's interpretation of the Dodd-Frank Act as an implausible reading of Congressional intent.
"Kalshi concedes gambling is a field that has been 'traditionally regulated by the states,' not the federal government," Shelby noted in his decision. He referenced the Supreme Court’s recognition of the substantial interest the government has in supporting non-gambling policies at the state level and emphasized that it is unlikely Congress would have reversed this stance through legislation addressing the 2008 housing financial crisis.
Shelby also addressed a common argument from prediction markets regarding compliance with both federal regulations and state laws.
"Kalshi has not demonstrated it would be impossible to comply with both Utah's anti-gambling law and the CEA," he wrote. He dismissed concerns about a potential "state-by-state patchwork" making compliance unmanageable, calling them conclusory without substantial backing. Kalshi’s contracts include an appendix of Trading Prohibitions for specific groups, which indicates that adding more categories of prohibited participants would not be overly burdensome. Judge Shelby concluded that the company failed to prove that complying with both federal and state laws would be impossible.
The next step for Kalshi could involve an appeal to the Tenth Circuit Court of Appeals, which covers Colorado, Kansas, Oklahoma, New Mexico, Utah, and Wyoming. In Utah, any form of gambling is illegal. Governor Spencer Cox had previously criticized the Commodity Futures Trading Commission (CFTC) and its chair, Michael Selig, for taking action on behalf of prediction markets, labeling them as gambling operations that harm lives.
Kalshi’s challenges continue as New York Attorney General Letitia James filed a lawsuit seeking $36 billion against the company, aiming to shut down its operations in the state. This legal action followed multiple court rejections of Kalshi’s attempts to stave off enforcement by the New York State Gaming Commission (NYSGC).
Recent developments in the Sixth Circuit Court of Appeals have involved conflicting federal court decisions regarding Kalshi's legitimacy in Ohio and Tennessee, with judges questioning the basis of Kalshi's claims that its offerings are governed by the Commodities Exchange Act.
After failing to effectively geoblock Nevada users, Kalshi agreed to exit the state by August 12. A judge in Washington also issued an injunction prohibiting the company from offering sports contracts, deeming its operations akin to online betting. However, a district court judge in Minnesota recently provided some respite by temporarily blocking the enforcement of a new law banning prediction markets in that state.
