Kalshi is asking a federal judge in Iowa to block state officials from enforcing gambling laws against sports event contracts available through its federally regulated prediction market.
In a July 31 filing in the U.S. District Court for the Southern District of Iowa, the company argued that Congress placed trading on designated contract markets under the Commodity Futures Trading Commission’s “exclusive jurisdiction”. Kalshi says Iowa would intrude on that authority by treating trades on its exchange as violations of state law.
The filing supports Kalshi’s bid for a preliminary injunction against Attorney General Brenna Bird, the Iowa Racing & Gaming Commission and several commission officials. Kalshi says it only wants to prevent state gambling and criminal statutes from being applied to transactions executed on its designated contract market, rather than restrict Iowa’s enforcement powers.
State officials have characterized Kalshi’s sports contracts offered to Iowa residents as criminal “bookmaking” and unlawful “gambling.” Kalshi argues those positions leave it facing a credible enforcement threat, possible criminal liability and additional compliance expenses.
Kalshi says federal oversight overrides Iowa gambling laws
Iowa is arguing that products traded on a federally supervised derivatives exchange should fall under state authority. Kalshi maintains that its sports contracts qualify as swaps under federal law because their value depends on events or contingencies carrying potential financial or economic consequences.
“States cannot invade the CFTC’s exclusive jurisdiction” “by re-characterizing swaps trad[ed] on DCMs as illegal gambling,” the filing states, quoting a CFTC amicus brief cited by Kalshi.
The dispute began before the latest filing. Kalshi sued Iowa officials on March 11 after a March 4 meeting with Bird and attorneys from her office shifted toward questions about whether its contracts violated state law. When Kalshi later sought clarity about possible action, an official responded, “we will not give any assurances about potential future enforcement.”
Iowa lawmakers have meanwhile pursued legislation specifically addressing prediction markets. Senate File 2494, advanced by the Senate Ways and Means Committee in April, would establish state rules for event-driven contracts and federally regulated designated contract markets.
The proposal includes a 21-year minimum age, restrictions involving officials and people with insider information, consumer safeguards and controls on advertising. Platforms would also face requirements covering manipulation monitoring, suspicious-activity reporting and internal compliance systems. The attorney general could pursue fines reaching $10,000 per violation and $50,000 for repeat violations, with much larger penalties for ignoring court orders.
Kalshi argues Iowa’s separate requirements for sports wagering businesses, including casino or racetrack partnerships and in-state geolocation, conflict with a nationwide exchange designed to provide impartial access. Decisions about prohibiting particular event contracts belong to the CFTC, it says, “not to fifty state regulators.”
The company also cited a July 27 Minnesota ruling temporarily blocking enforcement there and pointed to litigation in Nevada, New Jersey, Tennessee and Arizona. Without an Iowa injunction, Kalshi says it could face geofencing expenses, business restrictions and position liquidations affecting customers beyond the state.
Featured image: Kalshi / Canva
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