Kalshi received updates to ongoing legal wrangles in Maryland and Nevada this week, with the prediction market platform still operational in both jurisdictions.
In the Old Line State, Kalshi has dropped its request for a new injunction following an agreement with state officials to delay action until the Court of Appeals rules on Kalshi’s own appeal.
This is a challenge to the ruling made earlier this month that denied preliminary injunctive relief against the state’s enforcement of gambling laws against Kalshi.
US District Judge Adam B. Abelson denied Kalshi’s position, in what is a significant defeat for their aims to offer prediction markets nationwide under federal jurisdiction and oversight.
A filing on August 13 in the Maryland District Court notes that Kalshi received written assurances from the Maryland Lottery and Gaming, confirming they will not enforce state gambling laws against Kalshi pending the appeal court’s decision.
The impact of this is that the company will likely stay in business in Maryland until August, at least.
Background on Kalshi
Kalshi is a CFTC-regulated platform that offers event or outcome-based ‘contracts’, typically on sports and political outcomes. The company had argued that the Commodity Exchange Act (CEA) pre-empts state gambling laws, granting exclusive regulatory authority to the CFTC.
However, Maryland, like several other states, issued a cease-and-desist order, claiming Kalshi’s sports event contracts constitute illegal gambling under state law.
While the platform did not get the outcome it wanted in Maryland, it did in Nevada and New Jersey, where temporary injunctions were awarded.
However, further questions have been asked in Nevada, with the company asked for more detail on its position with a formal discovery process now deemed necessary.
Kalshi had contested that discovery is not needed as the case revolves around interpretations of federal and state law rather than facts.
Nevada insists on formal discovery process against Kalshi
Pushing back, the Nevada defendants insisted the court needs disclosure of all the facts on Kalshi’s services and operations so it can decide on whether Nevada’s gaming laws are preempted.
It was further claimed that there is no “emergency” that overrides the need for the discovery process, with Kalshi’s claim that discovery would cause “severe harm” being unjustified.
“Kalshi seeks truly extraordinary relief, to prevent Defendants from taking any discovery to challenge its version of the facts,” said the defendants.
“It has not come close to justifying that relief.
“Essentially, Kalshi wants to rush this litigation through to conclusion without affording Defendants or this Court the opportunity to discover facts about it, all while claiming that the cost of discovery will be so burdensome and harmful to it that it needs a decision within days.”
Nevada defendants are set to formally request that Kalshi disclose all communications with the Commodity Futures Trading Commission (CFTC) and the federal government regarding the platform’s designation and status, as well as further details relating to Kalshi’s event contracts.
In Maryland and Nevada, there are significant legal hurdles ahead before Kalshi’s case concludes in those states.
Image credit: Kalshi
