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A federal judge in Tennessee has granted a preliminary injunction preventing state officials from enforcing gambling laws against prediction market platform Kalshi, marking a significant win for the federally regulated exchange in its escalating legal battles with state regulators.
Summary
- A Tennessee federal court granted a preliminary injunction blocking the Tennessee Sports Wagering Council from enforcing state gambling laws against Kalshi while litigation continues.
- U.S. District Judge Aleta A. Trauger signaled Kalshi is likely to succeed in arguing its sports event contracts fall under federal derivatives law regulated by the Commodity Futures Trading Commission, not state betting statutes.
- The ruling adds to a growing nationwide legal patchwork, including enforcement efforts by the Nevada Gaming Control Board, highlighting an escalating federal-versus-state regulatory clash over prediction markets.
Tennessee court halts state crackdown on Kalshi
U.S. District Judge Aleta A. Trauger ruled that Kalshi is likely to succeed in its argument that its sports-related event contracts fall under federal derivatives law, rather than state gambling statutes. The decision temporarily blocks enforcement actions by the Tennessee Sports Wagering Council while the broader lawsuit proceeds.
Kalshi operates as a designated contract market regulated by the CFTC offering event-based contracts that allow users to trade on the outcome of real-world events, including sports.
The company argues that these contracts qualify as “swaps” under the Commodity Exchange Act, placing them squarely within federal jurisdiction and preempting state-level gambling laws.
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Tennessee regulators had issued cease-and-desist letters alleging that Kalshi’s sports markets constituted unlicensed sports betting. In granting the injunction, the court indicated that subjecting Kalshi to both federal derivatives oversight and state gaming regulation could undermine the uniform regulatory framework established by Congress.
The ruling adds to a growing patchwork of legal decisions nationwide. In Nevada, the Nevada Gaming Control Board has filed a civil enforcement action accusing Kalshi of offering unlawful wagering, while other states have taken mixed approaches in court.
Though temporary, the injunction underscores a broader jurisdictional clash between federal derivatives regulators and state gaming authorities. The outcome could have sweeping implications for prediction markets across the United States, potentially reshaping how sports-related event contracts are classified and regulated nationwide.
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