Kalshi’s fight to establish federal preemption over state gambling enforcement has expanded across multiple federal circuits, with courts in Nevada, New Jersey, Massachusetts, Tennessee, and Maryland reaching divergent conclusions on whether the company’s sports event contracts are CFTC-regulated swaps or unlicensed sports wagering subject to state authority.
The jurisdictional sprawl reflects what has become one of the most fractured regulatory disputes in U.S. financial law – with the Commodity Futures Trading Commission, state gaming regulators, tribal governments, and private plaintiffs all simultaneously pressing competing claims across the federal court system. A February 20, 2026 alert from Holland & Knight examines the escalating legal battle and the divergent outcomes courts have reached across jurisdictions.
CFTC Asserts Exclusive Jurisdiction
CFTC Chair Michael Selig publicly declared the agency’s intention to defend prediction market platforms against state enforcement, filing an amicus brief in the Ninth Circuit in support of Crypto.com, which faces action from the Nevada Gaming Control Board. The agency’s position is that event contracts offered on CFTC-registered designated contract markets are swaps under the Commodity Exchange Act, and that states cannot recharacterize swap trading as illegal gambling by invoking their gaming laws.
Selig characterized state enforcement efforts as a power grab that undermines the CFTC’s regulatory primacy, asserting that these products are commodity derivatives squarely within the agency’s remit. More than 36 states filed amicus briefs in a related Fourth Circuit case asserting the opposing view, arguing that traditional police power over gambling cannot be displaced without an unmistakably clear congressional statement.
Courts Split on the Core Question
The Tennessee litigation delivered a significant recent victory for Kalshi. On February 19, 2026, the U.S. District Court for the Middle District of Tennessee granted Kalshi a preliminary injunction, finding that its sports contracts are likely swaps under the CEA’s broad definitional language and that conflict preemption likely bars the Tennessee Sports Wagering Council from enforcing its cease-and-desist order. The court ordered Kalshi to post a $500,000 bond and dismissed the Sports Wagering Council on Eleventh Amendment grounds, entering the injunction against individual state officials.
That ruling deepens a district-level split the Tennessee court itself acknowledged: courts in New Jersey and the initial Nevada ruling sided with Kalshi, while courts in Maryland and a subsequent Nevada ruling sided with the states. In November 2025, the U.S. District Court for the District of Nevada dissolved a preliminary injunction that had protected Kalshi’s sports offerings, finding that the contracts amounted to an attempt to evade state regulation contrary to Congress’s intent behind the CEA. Kalshi’s setbacks in multiple jurisdictions have run parallel to its wins, with no appellate court having yet resolved the question as of the primary source date.
Massachusetts presents a distinct procedural posture. The state sued Kalshi in state court, and a Suffolk County Superior Court judge found the platform’s contracts subject to state gaming law, issuing a preliminary injunction set to take effect March 8, 2026. The Massachusetts Appeals Court stayed that injunction pending expedited briefing, stopping short of any view on the merits – a divergence that signals the preemption arguments carry sufficient weight to warrant full appellate consideration.
The Stakes for the Industry
With nearly 50 active cases addressing event contract oversight and state officials and regulators pressing enforcement across jurisdictions, the litigation is generating precisely the kind of interjurisdictional conflict that tends to attract Supreme Court review. The CEA’s definition of swap under 7 U.S.C. § 1a(47) and the scope of the gaming exclusion under the CEA remain unsettled and will likely require appellate resolution, with post-Loper Bright courts now expected to conduct independent textual analysis rather than deferring to the CFTC’s interpretation of its own authority.
For prediction market operators, the patchwork of conflicting injunctions creates genuine compliance exposure in every state where enforcement actions remain live. The multi-circuit battlefield means no single appellate ruling will settle the field; a Supreme Court decision or congressional amendment to the CEA could provide the regulatory certainty the sector needs to operate at scale.
Source: Holland & Knight
When he is not analysing the latest compliance updates or dissecting quarterly operator results, Florian follows Bundesliga football closely and maintains a healthy skepticism toward anyone claiming to have cracked a winning betting system. He brings a grounded, insider-aware perspective to his writing and is always more interested in the structural story behind the headline than the headline itself.