The New Jersey Division of Gaming Enforcement (DGE) has filed an appeal with the Third Circuit in response to Kalshi’s issued a cease-and-desist letter to Kalshi in March, demanding it remove its sports predictions markets from the Garden State. Kalshi sued in response.
By awarding the preliminary injunction, the District Court has allowed Kalshi to continue operating in New Jersey and signaled that is likely to win the case. The company has recently offered sports contracts as part of its real-world events markets.
The DGE regulates legal sports betting in New Jersey, and believes that Kalshi is listing “unauthorized” wagers.
What the DGE says in appeal
Kalshi winning a preliminary injunction last month is an indicator of it having a good chance to win the court battle. However, the DGE isn’t going down without a fight.
In the appeal to New Jersey’s Third Circuit court, the DGE claims the Commodity Futures Trading Commission (CFTC), Kalshi’s federal regulatory body, was not created to include sports wagering. The Professional and Amateur Sports Protection Act of 1992 (PASPA) was formed to regulate sports betting. The appeal stated:
“There are other provisions in federal law, outside of PASPA, that further demonstrate the federal policy of disfavoring sports-gambling. Indeed, in enacting PASPA, Congress explicitly noted that the law was ‘complementary to and consistent with [then] current Federal law’ with respect to sports wagering.
“Congress has, for example, . . . barred the placement of a sports gambling bet through wire communications to or from a place where such bets are illegal, . . . , and proscribed interstate transportation of means for carrying out sports lotteries.”
The DGE’s appeal could take a year, or more, to be decided on, unless both parties request expedition. Depending on the decision, it could impact Pennsylvania and Delaware, too.
Preliminary injunction ruling bodes well for Kalshi
The DGE has come up with a solid argument in its case to ban Kalshi from operating in the Garden State. However, Kalshi believes that federal law supersedes state law.
That is ultimately what the judge thinks, too, saying:
“Finally, I am persuaded that Kalshi’s sports-related event contracts fall within the CFTC’s exclusive jurisdiction and am unconvinced by defendants’ arguments to the contrary
“Defendants argue that sporting events are without potential financial, economic, or commercial consequence. On the record before me, I disagree. … Because I conclude that Kalshi has demonstrated a reasonable chance of prevailing — which in this case means proving that at the very least field preemption applies — I do not consider whether conflict preemption may also apply.”
Despite Kalshi having the inside track, the DGE is fighting to protect the legal sports betting industry with its appeal.
