A Connecticut judge has turned down Kalshi's urgent request for an injunction while it appeals a recent ruling. This decision comes after the company sought to leverage the Commodity Futures Trading Commission's (CFTC) emergency order to shield itself from state gambling regulations.
U.S. District Judge Vernon D. Oliver stated that the CFTC does not possess the authority to issue directives that contradict the court's interpretation of federal law. This ruling follows his earlier determination that the sports contracts offered by Kalshi do not qualify as swaps, thus falling outside the CFTC's jurisdiction.
Kalshi's motion aimed to prevent Connecticut officials from enforcing state gambling laws during its appeal of the August 10 decision to the Second Circuit. The company also requested temporary administrative relief while awaiting a ruling on its injunction request, but both motions were denied by Judge Oliver.
This ruling marks the first judicial response to the CFTC's unusual intervention in Kalshi's ongoing legal disputes with state regulators. Kalshi argued that the CFTC's emergency order from August 11 provided new evidence that adhering to state gambling laws conflicts with its obligations as a federally regulated designated contract market (DCM).
However, Judge Oliver previously ruled that Connecticut's gambling laws complement federal regulations rather than contradict them. He noted that the CFTC's order did not alter his earlier findings.
The CFTC had enacted its emergency authority following a lawsuit filed by New York Attorney General Letitia James, who aimed to prevent Kalshi from offering event contracts in the state. In response, the CFTC declared a 'market emergency' and instructed Kalshi to continue its operations according to the Commodity Exchange Act's Core Principles.
Kalshi maintained that the CFTC order emphasized the conflict between federal and state laws, arguing that it effectively required the company to disregard state regulations. However, Judge Oliver found this argument unpersuasive, emphasizing that the sports-event contracts in question are not swaps under CFTC jurisdiction.
He reiterated that both his Connecticut ruling and a decision from the Southern District of New York affirmed that federal law does not preempt state gambling laws concerning Kalshi's contracts. Citing a 2024 Supreme Court ruling, Oliver stated that courts should interpret federal statutes independently, rather than relying on administrative agencies.
Ultimately, Judge Oliver concluded that the CFTC's order did not alter his assessment that Kalshi failed to demonstrate the necessary likelihood of success on the merits for an injunction pending appeal. He also dismissed Kalshi's claims of potential irreparable harm due to the CFTC's intervention.