Iowa federal judge denies Kalshi bid to block state gambling laws
US District Judge Stephen Locher has rejected the call for a preliminary injunction.
US.- District Judge Stephen Locher has denied KalshiEX LLC’s motion for a preliminary injunction that would have stopped Iowa from applying its gambling laws to the prediction market operator. The District Court for the Southern District of Iowa determined that Kalshi is unlikely to prevail in its assertion that the Commodity Exchange Act (CEA) preempts Iowa’s gambling statutes concerning contracts for sports-related events.
Kalshi sought to stop Iowa Attorney General Brenna Bird and the Iowa Racing and Gaming Commission (IRGC) from taking legal action, arguing that the CFTC has exclusive jurisdiction over event contracts traded on its exchange and that state gambling laws are therefore preempted. Iowa has not brought an enforcement action against Kalshi, but the operator said a March 4 meeting with Bird’s office, and the state’s later refusal to give a long-term non-enforcement assurance, created a credible threat of prosecution.
Locher said the CEA’s exclusive-jurisdiction clause covers “swaps or contracts of sale of a commodity for future delivery,” and that the statutory definition of a swap does not specifically include sports betting. He said: “In context, it is easy to conclude that the word ‘event’ or ‘occurrence’ covers events in financial or asset markets like changes in interest rates or grain prices. It is harder to conclude that Congress intended for ‘event’ or ‘occurrence’ to encompass the outcome of a sporting event.”
He added that if Congress had intended to displace state gambling laws, “it should have been clear about that preemption,” and that the CEA text “does not meet the mark.”
Locher said Kalshi should have anticipated that state regulators would treat sports-related event contracts as sports gambling. He wrote that the company had advertised itself as “the first app for legal sports betting in all 50 states,” and that any cost of changing its Iowa operations was “a problem of the company’s own making.”
Bird said: “This ruling is a victory for the rule of law and for protecting Iowans. Out-of-state betting platforms cannot simply invent a loophole to ignore state law and turn financial markets into unregulated online casinos. Kalshi sued Iowa, trying to prove they could ignore Iowa’s laws. The court said they were wrong. Anyone offering sports betting in Iowa now knows they must play by the same rules.”
The underlying case remains pending. Federal courts remain split on whether the CEA preempts state gambling laws as applied to sports event contracts, with some judges granting Kalshi or the CFTC preliminary relief and others allowing state enforcement to proceed.
