TLDR
- A Connecticut federal judge denied Kalshi’s request to block state gambling law enforcement.
- The court ruled Kalshi’s sports event contracts do not qualify as swaps under federal commodities law.
- The judge rejected Kalshi’s claim that federal law preempts Connecticut’s gambling rules.
- Coinbase’s request for a similar injunction was denied in a related case the same day.
- Sports contracts made up between 80% and 90% of Kalshi’s total revenue.
A federal judge in Connecticut has ruled against Kalshi in its fight over state gambling laws. U.S. District Judge Vernon D. Oliver said the company is unlikely to win its case against the Connecticut Department of Consumer Protection.
Kalshi had asked the court to stop the state from enforcing its gambling laws against the company’s sports contracts. The judge said no.
Oliver focused on two main questions. The first was whether Kalshi’s sports contracts count as swaps under the Commodity Exchange Act. The second was whether federal law blocks states from regulating them at all.
Judge Finds Sports Contracts Are Not Swaps
Oliver ruled that Kalshi’s sports contracts are not swaps. He said the law separates an event from its outcome.
He used the Kentucky Derby as an example. The race itself is the event. Who wins it is an outcome, not a separate event.
Oliver quoted a similar ruling from Nevada in a case against Crypto.com. He agreed with that court’s reasoning.
A federal judge in Tennessee reached a different conclusion earlier this year. That judge said an outcome can count as its own event under the law.
Oliver also found that Kalshi’s contracts fail another part of the swap definition. He said they are not tied to a financial or economic consequence tied to the event itself.
The judge then turned to Kalshi’s preemption argument. Kalshi said federal commodities law should override state gambling rules. Oliver disagreed.
He pointed to specific parts of the Commodity Exchange Act. These sections show Congress only meant to block state gambling laws in limited cases.
Oliver wrote that Congress would have said so clearly if it meant to remove all state authority over these contracts. He said the law’s structure points the other way.
Kalshi also argued that Connecticut’s law conflicts with federal rules requiring fair market access. Oliver rejected that claim too.
He said federal rules do not force Kalshi to offer every contract in every state. State and federal rules can exist side by side, he wrote.
Coinbase Case And Revenue Details
The same judge also denied a preliminary injunction request from Coinbase in a related case. He cited his Kalshi ruling as part of that decision.
Both companies had asked for relief at hearings held on February 11. Oliver considered both requests around the same time.
The ruling included details about Kalshi’s business. Sports contracts accounted for 80% to 90% of the company’s listings. They also made up the same share of its revenue.
The court noted Kalshi’s valuation was near 11 billion dollars at the time of the hearing. Despite that size, the Commodity Futures Trading Commission had not reviewed any of Kalshi’s sports contracts under a special rule meant for gambling related products.
Oliver said Kalshi’s ability to list contracts on its own does not mean those contracts are legal. He said the company’s self certification is not the same as government approval.
The judge closed by saying the CFTC has not regulated sports wagering in a meaningful way. Kalshi has not said whether it will appeal the decision.
