Prediction markets suffered legal setbacks in two rulings this week as judges in Wisconsin and New York sided against the CFTC and Kalshi.
In New York, the Second Circuit denied Kalshi’s emergency motion for an injunction to prevent state authorities from enforcing gambling laws against the company. It has now referred the motion to a three-judge panel.
If the panel also denies the motion, then New York may take enforcement action against Kalshi. The state had agreed to pause any action until July 30 while its case against the operator remains ongoing.
Kalshi had appealed against Judge Annalisa Torres’ decision not to issue an injunction earlier this month. It is now running out of options to prevent what could be a highly damaging block in New York.
New York May Hit Kalshi on Friday
New York Attorney General Letitia James may now decide to take further action against Kalshi, barring intervention from the three-judge panel or the Supreme Court.
A lawsuit “could be filed in state court as soon as this week, likely on Friday, August 1”, wrote gaming lawyer Daniel Wallach on LinkedIn.
Legal experts predict the fight over whether sports prediction markets are legal will end up in the Supreme Court. The Second Circuit’s preliminary ruling threatens to create a circuit split, which could accelerate the case to the nation’s highest court.
The Third Circuit previously sided with Kalshi in its battle with New Jersey regulators. The company has also appealed negative rulings in courts in Arizona and Nevada to the Ninth Circuit.
Wisconsin Judge Rules Against CFTC
Wallach also noted that prediction markets suffered a setback in Wisconsin. Judge William Griesbach denied the CFTC an injunction in its lawsuit against the state.
The CFTC sued the state after it filed lawsuits against Kalshi, Polymarket, Coinbase, Crypto.com, and Robinhood.
In his ruling, Judge Griesbach stated, “The court does not accept the premise that federal law likely preempts Wisconsin gambling statutes.”
Wisconsin legalized online sports betting earlier this year through tribal compacts, and Judge Griebach added that it is better positioned “to prevent the risks associated with gambling addiction.”
He added that the CFTC has failed to show it will suffer any harm from the lawsuit brought by Wisconsin’s state authorities.
Wisconsin Could Deny Vote to Prediction Market Users
The ruling could lead Wisconsin to join other states in blocking prediction markets. The state has also threatened users that they could lose the right to vote if they trade on election markets.
Last week, the Wisconsin Elections Commission (WEC) said current laws explicitly prohibit betting on elections. The WEC cited statute 6.03, which disqualifies electors from voting “in any election in which the person has made or become interested, directly or indirectly, in any bet or wager depending upon the result of the election.”
Kalshi employees described the threats as “insane” and “bananas” on social media and characterized the WEC’s actions as “unconstitutional and illegal.”
Kalshi had celebrated a legal win in Minnesota earlier this week as a judge blocked the state from implementing a ban on prediction markets. The ruling, however, left open the possibility for the state to take action against Kalshi and Polymarket’s sports-event contracts. Minnesota does not offer legal sports betting.
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