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Editor's Note: This story has been updated following the release of a written order on April 10. 

Kalshi has won the first round in a multistate legal fight over sports prediction markets, after a federal judge in Nevada granted the company's request for a preliminary injunction and suggested that the permissibility of sports-event contracts was a matter for federal regulators or Congress to determine, not state gaming agencies.

Following a hearing on Tuesday (April 8), Judge Andrew P. Gordon of the U.S. District Court of Nevada granted the injunction that at least temporarily prevents state gaming regulators from taking enforcement action against the prediction exchange.

In a written order released Thursday, Gordon wrote that Kalshi was “in some sense, proceeding at its own risk and creating its own harms” given the uncertainty at the federal level surrounding the legality of its sports and election contracts.

“But for now, I will preserve the status quo, which is that these contracts are legal under federal law,” the judge wrote. 

“Requiring Kalshi to stop altogether and lose goodwill or damage its reputation; to spend millions to geofence, which might result in losing its [Commodity Futures Trading Commission] designation; or to continue doing what it is doing and face civil and criminal liability in Nevada suffices to show a likelihood of irreparable harm for at least a short term injunction.”

In addition, Gordon appeared to agree with Kalshi's argument that federal regulation by the Commodity Futures Trading Commission (CFTC) does preempt state law.

“Nevada regulatory agencies thus have no jurisdiction to decide that Kalshi’s conduct violates state law where, at least at present, those activities are legal under federal law,” he wrote. 

“Even if Kalshi’s sports contracts involve "gaming'', that would not subject Kalshi to state gaming laws. Rather, it would subject Kalshi to the special rule that allows the CFTC to conduct a public interest review.,” he continued. “The CFTC at least so far has allowed Kalshi to offer its sports contracts.”

“To the extent the sates or other interested parties object to Kalshi offering sports and election event contracts, they must take that up with the CFTC and Congress,” Gordon added. “Such policy issues are beyond the jurisdiction of this court.”

The decision is a key first step for Kalshi, as an adverse ruling could have allowed the Nevada Gaming Control Board to issue actions such as fines or potential criminal charges against the company for operating an unlicensed sportsbook.

“We are grateful for the court’s careful attention to this matter and recognition of Kalshi’s status as a CFTC-regulated exchange,” said Kalshi CEO Tarek Mansour in a post on social media.

In granting the injunction, the court also denied requests from state regulators to issue an injunction barring Kalshi from offering its sports event contracts in the state pending the result of the case.

As such, the company continues to offer the contracts in Nevada as well as the other states that have issued cease-and-desist orders, namely New Jersey, Ohio, Illinois, Maryland and Montana.

A similar lawsuit filed by Kalshi remains pending in New Jersey, with filings due later this month from the state, as well as a response brief from Kalshi before a judge will hear the company's motion for an injunction ahead of a April 30 deadline imposed by the New Jersey Division of Gaming Enforcement (DGE).

Various states, including Connecticut, Massachusetts, and Michigan, have also opened investigations into either Kalshi itself or other companies that offer sports event contracts, although those states have yet to issue cease-and-desist orders.

“The Michigan Gaming Control Board currently has investigations open regarding sports prediction markets offered in Michigan by unlicensed entities,” said a spokeswoman for the control board. “These investigations aim to address concerns about consumer protection and ensure that residents of Michigan are safeguarded against potential risks posed by unregulated operators.”

Although more states may follow suit with letters and investigations, the next key step is likely to come from the Commodity Futures Trading Commission, which is still expected to hold a roundtable discussion on the sports contracts in the coming weeks, as well as rule on a review of similar contracts offered by Crypto.com.

While the CFTC announced a review of the Crypto.com contracts, it did not trigger a review of Kalshi’s contracts, a fact that Kalshi has used to bolster its argument that its offering is a legitimate, federally-regulated product that preempts potential state regulation and licensing requirements.