Prediction market Kalshi has initiated legal proceedings against regulators in Iowa, citing concerns over potential enforcement actions related to its sports event contracts. According to Cointelegraph, the lawsuit was filed against Iowa Attorney General Brenna Bird, the Iowa Racing and Gaming Commission, and its board in a federal court on Wednesday. Kalshi claims there is a significant risk that Bird might pursue enforcement actions to obstruct the company's event contracts.
Kalshi's complaint reveals that a company representative met with Bird, anticipating a discussion about a tax bill under consideration in the Iowa legislature. However, the representative was met by a panel of attorneys, including Iowa's Solicitor General, who posed pointed questions about whether Kalshi's federally regulated offerings violated Iowa state law. Kalshi alleges Bird informed its representative that the Attorney General had been scrutinizing the company for an extended period.
Following the meeting, Kalshi reached out to a representative for the Attorney General on Tuesday, seeking assurances that no enforcement action was planned against them. However, the representative did not provide such assurances, stating in writing that no guarantees could be made regarding potential future enforcement.
Kalshi's lawsuit against Iowa represents the company's latest legal challenge against a U.S. state regulator concerning its ability to offer event contracts nationwide. In this lawsuit, Kalshi argues that federal law preempts Iowa from subjecting the company to state law, asserting that as a designated contract market, it falls under the exclusive jurisdiction of the Commodity Futures Trading Commission. This argument has been presented in multiple court cases with other state gambling regulators over the legality of sports event contracts.
State regulators have often claimed that these contracts, which allow users to bet on sporting event outcomes, constitute gambling and are subject to separate state-level laws, offered without a license. Federal courts have varied in their responses to these lawsuits. Recently, an Ohio federal court denied Kalshi's request to prevent Ohio regulators from acting against its sports contracts, citing insufficient evidence of CFTC jurisdiction. Earlier this year, a Massachusetts federal court blocked Kalshi from offering event contracts in the state, while Nevada sued the company last month after an appeals court rejected Kalshi's attempt to halt state actions.
Conversely, federal courts in New Jersey and Tennessee have temporarily sided with Kalshi, preventing state regulators from taking action against the company's sports event contracts.