"A federal judge in Nashville has stepped in to stop Tennessee regulators from going after prediction market company Kalshi, at least for now, intensifying a broader clash over who gets to police this emerging corner of the betting world. In a 25-page opinion, U.S. District Judge Aleta A. Trauger said Kalshi is likely to win its argument that federal law overrides Tennessee's attempt to treat its sports event contracts as illegal gambling. She issued a preliminary injunction blocking state officials from enforcing a cease-and-desist letter, though she dismissed the Tennessee Sports Wagering Council itself from the lawsuit on sovereign immunity grounds."
"The fight started in early January, when state regulators sent Kalshi a cease-and-desist letter accusing the company of running unlicensed sports betting. Officials demanded that the platform stop offering sports event contracts to Tennessee residents, cancel existing contracts, return customer deposits, and warned of possible civil and criminal penalties if it did not comply. Kalshi responded by suing to halt enforcement. In explaining why such emergency relief is difficult to obtain, Judge Trauger wrote, "A preliminary injunction is an extraordinary remedy which should be granted only if the movant carries his or her burden of proving that the circumstances clearly demand it.""
U.S. District Judge Aleta A. Trauger issued a 25-page opinion finding Kalshi is likely to prevail that federal law preempts Tennessee's attempt to treat its sports event contracts as illegal gambling. The judge granted a preliminary injunction preventing state officials from enforcing a cease-and-desist letter while dismissing the Tennessee Sports Wagering Council from the lawsuit on sovereign immunity grounds. The dispute centers on whether the Commodity Exchange Act classifies Kalshi's contracts as "swaps," which would place them under the exclusive jurisdiction of the CFTC. Tennessee regulators had demanded cessation, contract cancellations, deposit returns, and warned of civil and criminal penalties.
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