Judge Vernon D. Oliver denied Kalshi's motion for a preliminary injunction, ruling that sports-event contracts do not qualify as swaps under the federal Commodity Exchange Act. Even if they did, state gambling laws would not be pre-empted by federal regulation.
Kalshi has appealed to the Second Circuit. The company went to court after Connecticut's regulator issued a cease-and-desist order in December last year.
Parlays are casino gaming
Kalshi argued its markets have real economic consequences, unlike casino games. Judge Oliver saw no difference between a contract on a blackjack hand and a parlay on Broncos and Giants both winning.
'Kalshi stated it would not launch a contract on whether a player wins a hand of blackjack because it would be hard to prove that is not gambling. But the company offered no principled explanation for how a parlay on both teams winning differs from such a contract,' the judge wrote.
The outcome of Giants and Broncos games on a particular weekend may have no financial or commercial impact beyond the platform itself. Blackjack, meanwhile, affects the casino, the player and counterparties tied to the game. Under Kalshi's logic, any event with economic influence would meet the definition of a swap — precisely what Congress did not want, Oliver said, citing Chris Dodd, author of the 2010 CEA reform.
Attorney Daniel Wallach noted that in 2024 Kalshi itself called sports betting an example of 'gambling' banned under the CEA, while defending its right to run election markets. The position has now changed.
Parlays account for 77% of volume
Over the past seven days Kalshi traded $3.2bn in parlays, more than single sports contracts at $3.07bn. Sports and parlays made up 77% of total platform volume. The share will grow once the NFL season is in full swing.
Following Connecticut's ruling, nine states may now block Kalshi. Last week a judge in Utah allowed local gambling laws to apply to the platform. Nevada, Michigan, New York, Maryland, Massachusetts, Ohio and Washington have ruled against the company. Favourable verdicts have come only from New Jersey, Tennessee and partially Minnesota. Kalshi has appealed all rejections; the case will likely reach the Supreme Court.
