After facing setbacks in key lawsuits against the states of Nevada, Massachusetts, and Maryland, Kalshi pulled off a win in Tennessee this week over the fate of sports-related prediction markets.
A federal district judge in the southern state granted Kalshi’s motion Thursday for a preliminary injunction in its lawsuit against Tennessee regulators. While that victory is not a verdict itself, it reveals the judge believes that Kalshi is likely to succeed on the merits of its case.
That case, as put forward by Kalshi, argues that the company’s sports-related wagers are not sports bets under the jurisdiction of state-level regulators, but instead event contracts under the federal purview of the CFTC.
The Tennessee case, on the other hand, focused on a more narrow legal argument: whether sports-related prediction markets can be considered “swaps” under the CFTC’s purview. That argument lost on Thursday, and it also lost last year in New Jersey’s case against Kalshi.
Wallach told Decrypt he believes such matters of strategy also boil down to resources. Tennessee and New Jersey relied on in-house counsel to craft and argue their cases, whereas Nevada, for instance—one of the most successful instances yet of a state taking on prediction markets—hired outside counsel, which crafted and successfully defended the congressional intent argument.
“It’s short-sighted,” Wallach said. “[Tennessee] failed to address certain issues that Nevada’s outside counsel would have crushed.”
Ultimately, given the disparate conclusions that may soon be reached by multiple federal courts on the subject, it will likely be eventually resolved by the Supreme Court.
