At the conclusion of May, Kalshi initiated several legal actions in both Wisconsin and Minnesota, while simultaneously enhancing its surveillance team due to increasing scrutiny of prediction markets.
Kalshi's legal maneuvers included a lawsuit against Minnesota, an attempt to join the CFTC’s case in Wisconsin, and a petition for an immediate appeal regarding its dispute with the Ho-Chunk Nation. Additionally, the company has bolstered its surveillance team by recruiting a former FBI analyst.
On May 28, Kalshi filed a motion to intervene in the federal lawsuit against Wisconsin, aiming to align itself as a plaintiff with the U.S. Department of Justice and the CFTC. The litigation challenges Wisconsin's attempts to enforce its gambling laws on federally regulated event contracts.
Kalshi contended that Wisconsin's enforcement actions improperly seek to regulate contracts traded on a federally regulated exchange, which conflicts with the CFTC’s jurisdiction as outlined in the Commodity Exchange Act. The company also highlighted recent successes in New Jersey, Arizona, and Tennessee, where federal courts issued preliminary injunctions blocking state authorities from enforcing gambling laws against its event contracts.
In a related matter, Kalshi sought a federal court's certification for an immediate appeal on May 29 in its ongoing case with the Ho-Chunk Nation. This request followed a ruling from May 11 that denied parts of Kalshi’s motion to dismiss, with the court acknowledging plausible claims under the Indian Gaming Regulatory Act (IGRA) concerning sports event contracts on tribal lands.
Kalshi raised questions about whether tribes have the authority to regulate derivatives traded on federally regulated designated contract markets and whether alleged breaches of tribal gaming laws could substantiate IGRA claims. The company is pushing for the district court to certify the ruling for an interlocutory appeal, allowing for a review by the U.S. Court of Appeals for the Seventh Circuit.
Kalshi's lawsuit against Minnesota, filed on May 27, follows the state's enactment of a second ban on prediction markets. This new law replaces previous provisions that had already prompted a separate federal lawsuit from the CFTC.
Both lawsuits argue that the new legislation criminalizes federally sanctioned contract categories, including traditional derivatives markets related to weather and agricultural products.
In conjunction with its legal actions, Kalshi has expanded its compliance and market surveillance operations. The company hired Tyler Neff, a former FBI intelligence analyst, to enhance its surveillance team. Neff brings extensive experience, having worked in the FBI’s New York field office and at various financial institutions.
This focus on surveillance comes at a time of heightened scrutiny regarding the integrity of prediction markets, especially following recent incidents of suspicious trading activity, including charges against a Google engineer for insider trading involving Polymarket.
As June unfolds, Kalshi continues to navigate the legal landscape it encountered at the end of May.