Kalshi Wins Temporary Halt on Tennessee’s Cease-and-Desist Order

Highlights:

• Kalshi wins a temporary legal halt against Tennessee regulators.
• Tennessee’s cease-and-desist order is frozen until January 26.
• Kalshi argues its operations are federally regulated under the CFTC.

A federal judge has temporarily blocked a cease-and-desist order on the prediction market platform, Kalshi, by Tennessee state regulators. This ruling comes after Kalshi sued the Tennessee Sports Wagering Council, contending that the state has no authority over the operations of the company.

Tennessee regulators threatened the operations of Kalshi, alleging that the platform was offering sports event contracts without a necessary state license. The cease-and-desist order issued on January 10 targeted three platforms, including Kalshi, Polymarket, and Crypto.com. It required them to terminate contracts, refund Tennessee users, and cease all operations by January 31. Moreover, non-compliance could lead to fines of up to $25,000 per violation. Kalshi, however, swiftly sued the state, claiming that it is governed under federal law as a dedicated contract market overseen by the CFTC.

Kalshi’s Legal Battle in Tennessee

The lawsuit by Kalshi against Tennessee regulators states that the state is interfering with the federal regulatory framework for derivatives markets. The legal team of Kalshi claims that the sports event contracts of the platform, being regulated under the CFTC, do not fall under the gambling laws at the state level. They claim that the actions taken by Tennessee are unconstitutional because they interfere with federal jurisdiction.

The judge presiding over the case, Aleta Trauger, supported the arguments made by Kalshi. She granted a temporary restraining order that prevents Tennessee from enforcing its order. Judge Trauger, in her ruling, argued that Kalshi would be irreparably harmed had the state been allowed to enforce its laws. The judge further stated that Kalshi had a high chance of winning its legal challenge. The reason is that its rights would probably be breached should the actions of the state be allowed to continue.

As a result, Kalshi is allowed to keep operating in Tennessee for now as the court case moves forward. The move by the state to stop the operations of Kalshi has been put on hold. This consequently gives the company time to question the legitimacy of the state’s actions in a federal court. As a result, the hearing on the preliminary injunction is scheduled for January 26. The court will determine whether to extend this temporary suspension or grant the state order to proceed.

Ongoing Legal Disputes with State Regulators

This legal victory of the Kalshi in Tennessee is part of a broader trend that has seen the company being sued by state regulators in similar cases. Regulators in states like New Jersey and Nevada have targeted the platform. They sought to limit the operating ability of the platform in their respective states. However, federal judges ruled in favor of Kalshi in both instances. They granted temporary injunctions halting state-regulating bodies from taking action while the lawsuits proceeded.

However, Kalshi’s legal battle has not been without setbacks. In Maryland, a judge rejected the platform’s request to have a temporary block. This enabled the state to continue its enforcement actions.

Meanwhile, prediction markets have been under growing scrutiny from lawmakers recently. This is after a controversial wager on the detention of the Venezuelan President Nicolás Maduro. The bet, initially involving a wager of $32,000, had grown to more than $400,000 when Maduro was arrested, sparking concerns.