Kalshi’s appeal of a temporary injunction barring the prediction market company from offering sports event contracts in Massachusetts played out in the state’s supreme court on Monday.
Attorneys for the company argued that prediction markets are solely regulated at the federal level. They argued the Commodity Futures Trading Commission (CFTC) has oversight, not state gaming regulators.
“This is fundamentally a federal regulatory issue,” Kalshi attorney Grant Mainland said.
Assistant Attorney General Gerard Cedrone disagreed. He said that ruling in favor of Kalshi would be a massive shift in the Bay State’s sports betting regulation.
“It would be blocking out state regulation of what is in all respects a sports bet,” he said.
A Swap Or A Wager?
The company has asked the Massachusetts Supreme Court to overturn the injunction. Some justices, however, were skeptical that prediction markets on sporting events were any different from traditional sports wagering.
“In what way do they differentiate from what would colloquially be known as a bet?” Justice Gabrielle Wolohojian asked during the proceedings.
State gaming regulators have argued that prediction markets skirt state gaming laws. Massachusetts Attorney General Andrea Joy Campbell (D) filed a lawsuit against Kalshi in September. Then, a state judge granted a preliminary injunction in February.
That injunction was paused as the appeals process played out. In court, Mainland pointed to a federal appeals court ruling in April that found event contracts were different from sports betting. Thus, they can only be regulated at the federal level.
However, some justices doubted that Congress intended to bypass state laws regulating sports betting when enacting laws outlining “swaps” as part of the 2008 Dodd-Frank Wall Street Reform and Consumer Protection Act.
Justice Scott Kafker argued that Congress wasn’t clear in the legislation in regard to giving the federal government control over prediction markets that offer “a way to bet on a game,” according to Reuters.
“If you want to gamble on a game, this is one way to do it,” Kafker said.
Congress Could Act Before US Supreme Court Hears A Case
The entire issue could eventually reach the US Supreme Court. But some federal lawmakers have pushed to ban prediction market firms from offering any markets on sports events or other casino-style games.
After months of legal wrangling in numerous states, the CFTC took action. They filed lawsuits against the states of Arizona, Connecticut, and Illinois earlier this month. The commission made a similar move against New York.
