A federal judge denied Kalshi’s request for a preliminary injunction against Connecticut regulators, holding that its sports-event contracts are not swaps under the Commodity Exchange Act, so the CFTC’s exclusive jurisdiction never attached. Coinbase Financial Markets lost a companion motion on the same reasoning despite never having received a cease-and-desist.
Key Takeaways
Judge Vernon Oliver held Kalshi’s sports contracts are not swaps under the CEA.Sports contracts were 80% to 90% of Kalshi’s listings and revenue, the order says.The CFTC has never reviewed a single Kalshi sports contract under its special rule.His second ground was the requirement that the event be associated with a potential financial, economic, or commercial consequence. That connection must be embedded in the event itself, Oliver held, not created by endorsement contracts, bonus provisions, side wagers, or other downstream arrangements made by independent actors. A sporting event has consequences built in through ticket sales, broadcast rights, and advertising; who wins it does not. He also noted Kalshi’s own concession in earlier litigation before the D.C. Circuit that contracts on games are unlikely to serve any commercial or hedging interest.
Between 80% and 90% of the contracts listed on Kalshi’s exchange were sports-event contracts, responsible for a similar portion of company revenue. The CFTC has not subjected a single one to review under the special rule, let alone prohibited any. Kalshi was valued at roughly $11 billion at February’s hearing and has about 24,000 Connecticut users.
Oliver reached preemption anyway and rejected it on both theories. The special rule at § 7a-2(c)(5)(C), which lets the CFTC bar contracts involving gaming or activity unlawful under state law, reflects an intent to preserve state authority rather than displace it. Federal impartial-access rules bar discriminatory access criteria; they do not require a DCM to offer contracts nationwide. And he was unwilling to read Dodd-Frank as handing exclusive authority over sports betting to a financial regulator with no history in the field, noting that Congress has never appropriated funds to the CFTC for that purpose.
Kalshi also lost on irreparable harm. Its asserted injuries were largely monetary, and to a significant extent self-inflicted, given that it kept listing the contracts through repeated regulatory warnings and adverse rulings. Because Kalshi is already building geofencing for other states, Oliver found Connecticut compliance unlikely to add much cost. He noted Kalshi has issued no warnings to users while advertising itself as the first app for legal sports betting in all 50 states.
A Kalshi spokesperson told Sports Betting Dime (a Sportradar subsidiary) the company respectfully disagrees with the decision and is considering all legal options. Oliver ordered the parties to file their Rule 26(f) report by Aug. 24, with Connecticut’s response to the complaint due Aug. 31.
