Kalshi Preemptively Sues Iowa to Defend Sports Contracts

Prediction market Kalshi has sued regulators in the US state of Iowa, claiming it did so as there was a risk of an impending enforcement action over its sports event contracts.

Kalshi sued Iowa Attorney General Brenna Bird, along with the Iowa Racing and Gaming Commission and its board, in an Iowa federal court on Wednesday, claiming there “is a substantial risk” Bird would bring enforcement action to block the company’s event contracts.

In its complaint, Kalshi said a company representative met with Bird for what was believed to be a discussion about a tax bill currently under consideration in the Iowa legislature.

“Instead, he [Kalshi’s representative] was greeted by a panel of attorneys, including Iowa’s Solicitor General, who proceeded to ask a series of pointed questions challenging whether Kalshi’s federally regulated offerings ran afoul of (preempted) Iowa state law,” Kalshi claimed.

After the meeting, Kalshi said it contacted a representative for the Attorney General on Tuesday “to seek assurances that the Iowa AG did not intend to bring an enforcement action against Kalshi.”

“The representative did not provide such assurances,” Kalshi said. “To the contrary, the official said in writing that ‘we will not give any assurances about potential future enforcement.’”

Cointelegraph contacted Bird’s office and the Iowa Racing and Gaming Commission for comment.

Prediction markets fight states over sports contracts

Kalshi’s lawsuit against Iowa is the company’s latest legal action targeted at a US state regulator over whether it can offer event contracts across the US.

In the latest lawsuit, Kalshi argued that “federal law preempts Iowa from subjecting Kalshi to state law,” and as a designated contract market, it is subject to the “exclusive jurisdiction” of the Commodity Futures Trading Commission.

The company has made a similar argument in multiple court cases with other state gambling regulators over the legality of sports event contracts.

Related: US Senate bill targets prediction markets on war and assassinations

Many state regulators have alleged that the contracts, which allow users to bet on the outcome of sporting events, are gambling, subject to separate state-level laws, and are offered without a license.

Federal courts have differed in their response to the lawsuits. 

On Monday, an Ohio federal court denied Kalshi’s request to block Ohio regulators from taking action against its sports contracts, saying the company failed to show that they were subject to the CFTC’s jurisdiction.

A federal court in Massachusetts blocked Kalshi from offering event contracts in the state earlier this year, and Nevada sued the company last month after an appeals court knocked back Kalshi’s bid to stop the state from taking action.

Federal courts in New Jersey and Tennessee, in contrast, have sided with Kalshi to temporarily block state regulators from taking action over the company’s sports event contracts.

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