Kalshi Sues Louisiana in Pre-Emptive Legal Move

Kalshi is pre-empting legal action from the Louisiana Gaming Control Board (LGCB) and Attorney General by issuing its own lawsuit against the state.

The prediction market giant has filed against Attorney General Liz Murrill, Governor Jeff Landry, and members of the LGCB.

The move is a pre-emptive strike against a state that has not hidden its desire to crack down on non-state-regulated prediction exchanges.

Louisiana has stated public positions over the past year and support other states with sports betting laws that want to regulate exchanges.

In the legal action, Kalshi stated that Louisiana officials “make clear that [the] Defendants believe Kalshi’s offering of event contracts in Louisiana violates Louisiana law.”

Kalshi’s Big Gamble?

Louisiana has been one of a group of states to send cease-and-desist letters to unregulated betting sites. December saw a wave of over 40 such letters sent to online sports betting sites.

On August 1, HB53 (Act 48) was introduced, treating sweepstakes casinos as “racketeering”. The broad law covers “gambling by computer”, which prediction markets could view as being used to cover exchanges.

Under enforcement tools brought in, the legal action states, “the Attorney General may sue to restrain such conduct by temporary or permanent injunction.” Kalshi, the suit says, “has no option but to seek judicial relief” as Louisiana officials “have provided no assurance they will refrain from enforcing Louisiana law.”

It’s an interesting move by Kalshi as prediction markets find themselves increasingly in the crosshairs over what they can and can’t offer in the U.S.

Kalshi vs Louisiana: What We Know

• Case filed: 23
• Defendants: Attorney General Liz Murrill, Governor Jeff Landry, LGCB members
• Cause: Pre-emptive legal action based on previous statements from state officials over legality of prediction markets.
• Current Kalshi regulation: Federal regulation by CFTC under Commodity Exchange Act (CEA)

Changing Tactics in State Battles

Kalshi is using “field pre-emption” in its latest legal battle against hostile states. It won on “Congress pre-emption” in Nevada last year, with the courts deciding that Kalshi would likely win the argument that it is regulated by the CFTC.

However, the Ninth Circuit Court of Appeals shot that down in September over the legality of sports event contracts. Sports contracts that resemble sport wagers are muddying the waters and causing legal havoc across the country.

Kalshi’s use of field pre-emption seems to signal a change in tactics by prediction markets. The exchanges have had wins and losses in federal courts, with no clear victory for either side.

Meanwhile, Utah Sues Kalshi

The problem if regulating prediction markets in a country with 50 competing viewpoints is nowhere better illustrated that in Utah.

This month, Utah sued Kalshi, with the Attorney General calling online gambling a “public nuisance”.

"Kalshi bet that Utah wouldn't use its gambling laws," the AG said. "Kalshi lost that bet."

Unlike some states which just want to prohibit sports contracts, Utah is going the whole hog. It wans to band sports, politics, and mention markets in one of the country’s most bitter contests.

Kalshi Has Hope from Illinois Win

Kalshi will look to Illinois as a rare win in its ongoing battle against the states. The company won an appeals court victory earlier this month after a judge ruled against state gaming regulators there.

Judge Martha Pacold ruled that Kalshi and Coinbase answer to the CFTC, not the state gaming commission. Kalshi called the ruling “beautiful”. It will be hoping for more “beautiful” wins in Louisiana.