KalshiEX LLC v. Mary Jo Flaherty

Summary

The U.S. Court of Appeals for the Third Circuit affirmed a preliminary injunction preventing New Jersey officials from enforcing state gambling laws against KalshiEX’s sports-related event contracts. The court held that Kalshi demonstrated a reasonable chance of success on its argument that the Commodity Exchange Act preempts state regulation of swaps traded on a CFTC-licensed designated contract market. The court also upheld the District Court’s findings regarding irreparable harm, the balance of equities, and the public interest.

Holdings

1. Kalshi's sports-related event contracts fall within the statutory definition of swaps because they provide for payment dependent on the occurrence of an event associated with a potential financial, economic, or commercial consequence.
2. The Commodity Exchange Act field-preempts otherwise applicable New Jersey laws that purport to regulate sports-related event contracts traded on CFTC-licensed designated contract markets.
3. New Jersey's gambling laws and constitutional provisions are also conflict-preempted because enforcement against sports-related event contracts traded on designated contract markets would obstruct the Commodity Exchange Act's purposes and objectives.
4. The District Court did not abuse its discretion in finding that Kalshi demonstrated a reasonable chance of success, likely irreparable harm, and that the balance of equities and public interest favored preliminary relief.

Questions Presented

1. Whether Kalshi's sports-related event contracts qualify as swaps under the Commodity Exchange Act.
2. Whether the Commodity Exchange Act field-preempts New Jersey gambling laws and constitutional provisions insofar as they regulate sports-related event contracts traded on a CFTC-licensed designated contract market.
3. Whether New Jersey's regulation is conflict-preempted because it obstructs the purposes and objectives of the Commodity Exchange Act.
4. Whether the District Court properly granted a preliminary injunction under the governing four-factor test.

Disposition

affirmed