The Kalshi emergency motion failed at the 10th US Circuit Court of Appeals, leaving Utah free to enforce its gambling laws while the prediction market operator continues its appeal. The ruling removed the temporary legal protection that Kalshi had requested.
According to Daniel Wallach, the court refused to grant Kalshi an injunction pending appeal. Utah is free to bring either civil or criminal action even while the lawsuit is ongoing.
It does not address whether the contracts involving Kalshi constitute federal derivatives or state-regulated gambling.
What Does the Kalshi Emergency Motion Mean for Utah?
Kalshi sought relief following a ruling by US District Judge Robert Shelby that granted Utah the right to enforce its gambling regulations. This would stop enforcement pending review by the 10th Circuit of the case.
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In August, Shelby denied the injunction application of Kalshi. As per the Associated Press, he ruled that the cited federal statute did not shield Utah from enforcing its gambling laws.
Derek Brown, Utah attorney general, stated that he would seek to enforce the state laws. Utah bans proposition wagers on events happening within a game.
Why Does Kalshi Claim Federal Protection?
Kalshi is a designated contract market registered with the Commodity Futures Trading Commission as such. The firm claims that its sports contracts are either event contracts or swaps within the meaning of the Commodity Exchange Act enacted by Congress.
State officials disagree with that characterization. According to them, the contracts predicated on outcomes of the games and performance of individual players represent sports gambling. This definition requires state licensing, age restrictions, and other rules of the industry.
Kalshi emergency motion was not successful. The jurisdictional dispute thus remains undecided as to whether the contracts in question fall under state law as gambling or they do not.
Casino.org reported on Sept. 8 that 38 lawsuits have been filed in 21 states. Cease and desist orders have been issued in no less than ten jurisdictions to exchanges.
In Washington, only contracts regarding sports, elections, politics, entertainment, culture, technology, and science are banned. The contracts covering commodities, climate, economy, and finances are still available.
Michigan requires that Kalshi make its sports contracts unavailable to citizens. A daily fine up to $500,000 may be imposed if the company is found in violation.
How Often Have States Won Similar Cases?
According to Wallach, the decision was the 12th consecutive ruling in favor of the states following the decision by a judge in Minnesota to block the ban that the state had proposed. The states prevailed in 35 out of 41 procedures, translating to a win percentage of 85%.
The emergency motion filed by Kalshi becomes part of this trend of decisions. Nonetheless, preliminary injunctions and stays do not determine the ultimate decision of any case. The court will consider whether there is potential for irreparable harm, public interest, and likelihood of success of the applicant.
On August 28, the unanimous 9th Circuit panel made the decision that the products offered by Kalshi were bets and not swaps. The Nevada Gaming Commission can enforce gaming laws.
However, the decision by the court is in conflict with an earlier decision made by the 3rd Circuit in April. The decision allowed the Kalshi’s injunction against New Jersey.
Could the Supreme Court Resolve the Dispute?
New Jersey sought review of the 3rd Circuit decision on Sept. 2 at the Supreme Court of the United States. Its petition raises whether federal law bars states from enforcing gambling laws regarding contracts in CFTC-regulated exchanges.
According to New Jersey, the Dodd-Frank Act does not unambiguously strip states of their power over sports wagering. It also challenges the contention that such contracts fall under CFTC’s exclusive jurisdiction.
Kalshi contends that the federal regulation preempts conflicting state laws. It has stated that it is unconcerned about the petition and remains confident of the decisions of the lower courts.
The Supreme Court has yet to take up the case. Kalshi can file a response before four judges decide on whether to hear the case.
Polymarket traders estimate a 31% probability for the Supreme Court hearing of a sports-event-contract case by the end of 2026. This number is an indication of the market makers’ views and not a prediction of the judicial process.
The denial of the Kalshi emergency motion allows Utah to enforce its gambling laws while the case proceeds. However, the Kalshi emergency motion and New Jersey’s Supreme Court petition could still determine whether federal or state authorities regulate sports prediction markets.
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