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Kalshi Granted Temporary Injunction in Brand-new Jersey Sports Trading Case

Prediction market operators received more great news today as Kalshi won a preliminary limiting order and a short-lived injunction versus the New Jersey Division of Gaming Enforcement (NJDGE). Last month, the NJDGE released cease-and-desist orders to Kalshi and Robinhood, another forecast market service provider.
Key Insights:
- New Jersey is among a number of states that issued cease-and-desist orders to Kalshi and/or other prediction market service providers over their recently used sports occasion futures agreements.
- This is the second federal court, after the U.S. District Court for the District of Nevada, that has agreed Kalshi.
- Should forecast markets maintain their asserted right to use sporting occasion agreements, without state policy or tax, it could negatively affect state sports betting profits.
After receiving a cease-and-desist order from the NJDGE, Kalshi submitted a motion for a preliminary restraining order and a short-lived injunction with the U.S District Court for the District of New Jersey. In reaction, the NJDGE filed an opposition to Kalshi's movement.
The NJDGE argues that Kalshi made its sporting occasion contracts available to New Jersey residents in infraction of New Jersey sports betting laws and policies. Kalshi is unlicensed by the state. As a forecast market operator, however, it is federally regulated by the Commodity Futures Trading Commission (CFTC).
Kalshi argues that the state has no jurisdiction over its sporting occasion agreements as prediction markets are controlled by the federal government. The NJDGE countered that sporting event agreements need to not fall under the CFTC's jurisdiction as they are not monetary in nature. The vast majority of regulated futures agreements are based upon the future rates of products or other monetary securities.
On both points, the judge sided with Kalshi.
"I am encouraged that Kalshi's sports-related occasion contracts fall within the CFTC's unique jurisdiction and am skeptical by the accused's arguments to the contrary," Judge Edward Kiel wrote. "Defendants argue that sporting events lack potential monetary, financial, or business effect. On the record before me, I disagree."
The next states in Kalshi's sights
Like Nevada and New Jersey, Maryland provided Kalshi a cease-and-desist order. And like Nevada and New Jersey, Kalshi submitted a movement for an initial restraining order and a momentary injunction with Maryland's U.S. District Court.
Meanwhile, Ohio expects that it might be the next recipient of a Kalshi claim. Ohio provided a cease-and-desist order to Kalshi and 2 other prediction market business late last month.
While Kalshi appears to have the upper hand in these initial legal battles, the war over sports trading policy will likely continue. For something, there's a lot of ambiguity in federal law and policy to keep attorneys and judges hectic.
The Federal Wire Act restricts interstate sports betting, which is one reason sports wagering is legislated and managed intrastate. Meanwhile, CFTC Rule 40.11(a)( 1) prohibits any occasion agreement "that involves, associates with, or references terrorism, assassination, war, video gaming, or an activity that is illegal under any State or Federal law ..."
Also, there is simply too much at stake for the states to simply fold. For circumstances, New Jersey produced $138.3 million in online sports wagering tax profits last year. Should prevail, states stand to lose among their latest and dependable income streams. Meanwhile, business like DraftKings and FanDuel, which have made sizable investments to protect state licenses and state regulative approvals, have a lot to lose. Afterall, it will be difficult to contend with a forecast market operator that isn't required to pay up to 50% in state taxes.