A total of 34 state attorneys general filed a joint brief in the US Court of Appeals for the Third Circuit on Thursday in support of New Jersey in their ongoing case against Kalshi over the legality of their sports event contract offerings.
The brief primarily focuses on defending the traditional authority of states to regulate gambling, particularly online sports betting, and argues against the notion that the Commodity Exchange Act (CEA) intended for federal CFTC to preempt state regulation in this area.
The filing follows amicus briefs from a number of other entities, including several tribes that argue that Kalshi’s sports prediction market offerings violate the Indian Gaming Regulatory Act and tribal gaming exclusivity.
State AGs arguments against Kalshi sports contracts
In addition to the state AGs from a number of key states, the amici curiae brief includes representatives from the District of Columbia and the Northern Mariana Islands. Co-leader of the “bipartisan coalition” that filed the brief, Ohio AG Dave Yost, said in a press release:
“States rightfully have the ability to protect their citizens from the negative consequences of online gambling, no matter how it’s packaged. We’re protecting the unprotected.”
The brief emphasizes the long history of state regulation over gambling and the unique position states have to tailor gaming regulation to local values and concerns, while addressing protections for local residents and addressing gambling-related harms. The AGs highlight the risks to consumers and vulnerable populations if states lose the ability to regulate online sports betting, citing increased gambling addiction and related social harms.
“Eliminating the states’ ability to regulate online sports betting would pose very serious risks to the states’ citizens,” according to the brief. “Online sports betting, while convenient and entertaining for many, comes with life-altering consequences for some.”
At the heart of the legal debate is whether or not Congress intended through the CEA for the federal Commodity Futures Trading Commission (CFTC) to preempt state regulation of event contracts, including those related to sports. But that is just one of many ongoing legal questions that state gaming regulators are seeking clarity on.
More states join in against Kalshi’s sports offerings
The other co-leader of the coalition behind Thursday’s joint brief in support of NJ is Nevada AG Aaron Ford. Nevada is currently engaged in their own case with Kalshi. Significantly, Kalshi has taken legal action against New Jersey, Nevada, and Maryland in response to cease-and-desist letters from those states.
Kalshi scored key early legal victories in the company’s cases against New Jersey and Nevada, where courts granted Kalshi’s requests for preliminary injunction, preventing the states from enforcing their cease-and-desists against the prediction markets exchange.
In addition to those three states, four others sent similar C&Ds against Kalshi, among other CFTC-regulated platforms offering sports event contracts like Robinhood and Crypto.com, earlier this year. Those states include:
- Arizona
- Illinois
- Montana
- Ohio
The latest amici curiae brief against Kalshi (in support of New Jersey), includes AGs from the following states (and territories):
- Alabama
- Arizona
- Arkansas
- Colorado
- Connecticut
- Delaware
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Montana
- New York
- North Carolina
- North Dakota
- Oregon
- Pennsylvania
- Rhode Island
- South Carolina
- South Dakota
- Tennessee
- Utah
- Vermont
- Washington
- Wisconsin
- The District of Columbia
- The Northern Mariana Islands
While opposition appears to be mounting, Kalshi has the benefit of a supportive administration and a solid record in court cases to date. But upcoming court decisions will be pivotal in securing Kalshi and other prediction market platforms’ runway for offering sports-related contracts, or determining they are outside of the lane of Designated Contract Markets.
