Massachusetts Judge Delays Injunction on Kalshi Sports Contracts While Considering Stay
UPDATED: A Massachusetts judge who issued an injunction on Wednesday barring Kalshi from offering sports events contracts in the state said Friday that he would hold off on setting an effective date for the injunction while he considers the prediction market operator's request for a stay.
That decision by Superior Court Justice Christopher Barry-Smith came a few hours after Kalshi made its request to keep the injunction from taking effect while the company appeals the ruling.
On Wednesday, Barry-Smith became the first judge to issue such an order against Kalshi, a federally regulated entity that operates an online futures exchange. Kalshi plans to appeal Barry-Smith’s decision and seeks a stay to continue offering contracts on sporting events as the appeal plays out in state courts.
Massachusetts filed suit against Kalshi in September. The state argued that the operator was violating state law and alleging its contracts on sports markets were tantamount to sports betting. The commonwealth requires any entity offering sports betting to obtain a license from the Massachusetts Gaming Commission.
In a 20-page memo supporting Kalshi’s request for a stay, the operator’s lawyers pointed out that every other court where it or another prediction market has faced accusations of violating a state’s law had previously ruled in favor of the operator. That includes a federal court in Massachusetts, which earlier this month said it would reconsider a ruling against Robinhood and permitted that operator to request protection from Massachusetts officials while it reconsiders the case.
If there were ever a case where a stay pending appeal was warranted, this is it.”
lawyers for Kalshi wrote in their emergency motion for the stay
As Kalshi seeks to stop the injunction from taking immediate effect, officials from other states, including New Jersey, are using the Massachusetts ruling in their arguments to stop Kalshi from offering sporting event contracts in their jurisdictions.
Judge Sets Timeline for Stay Ruling
Gaming attorney Daniel Wallach reported on X that Barry-Smith was weary of how a stay could affect individuals who already have purchased contracts through Kalshi. An attorney with the Massachusetts Attorney General’s office said the state does not want take action on transactions that have already taken place, but the state does want to bar any new sales or acquisitions from being made.
Barry-Smith gave the state until next Friday to file its opposition to Kalshi’s request, with Kalshi’s lawyers getting until Feb. 4 to reply. The judge will hold a hearing after those filings to make his decision.
If Kalshi cannot get a stay from Suffolk Superior Court it will take up the issue with the commonwealth’s appellate court.
Kalshi Believes It Can Win Appeal
While lawyers for Kalshi are still reviewing Barry-Smith’s decision, they wrote in the memo that they already see several reasons why they will succeed in their appeal.
Those arguments include that the U.S. Commodity Futures Trading Commission, which regulated Kalshi and other approved prediction markets, has “exclusive jurisdiction” over the trading that occurs in those markets.
Kalshi began offering contracts on sporting events a year ago, shortly after President Trump’s inauguration. While longstanding federal law has prohibited prediction market operators from offering contracts on gaming activities, which have been defined to include sporting events, the CFTC under the Trump Administration has not stopped Kalshi or other operators from offering such contracts.
Further, Kalshi’s attorneys claim the company would “suffer irreparable harm” if it must abide by the terms of the injunction and Kalshi ultimately wins on appeal.
To abide by the injunction, Kalshi said it would need “to develop and implement complex and expensive technology” it does not have to bar anyone who identifies as a Massachusetts resident and anyone who happens to be in the Bay State at the time from placing an order on a sports event contract.
On top of that, the injunction would require Kalshi to implement that geolocation technology within seven days of its taking effect, and such technology would also put Kalshi at risk, its lawyers claim, of violating federal regulations.
Sportsbooks vs. Prediction Markets
While the sports contracts that Kalshi and other exchanges offer are similar to the markets offered by sportsbooks such as FanDuel and DraftKings, there are notable differences between the two.
When bettors make wagers through a sportsbook, oddsmakers set prices and winning bets pay out. In a prediction market, a trader places an order for contracts on a given position at a requested price. However, the trade does not occur until another trader agrees to buy or sell the contracts at that price.
Those who hold contracts for the successful outcome receive a set price – at most exchanges, it is $1 per contract – upon conclusion of the event. Those holding losing contracts receive nothing. However, the exchange market allows traders to buy and sell, giving them the chance to secure a profit or cap their losses.
Not having access to an exchange would leave Massachusetts bettors “at a disadvantage to peers across the country,” Kalshi’s lawyers claimed.
In addition, adults aged 18 and older can participate in prediction markets. In Massachusetts and most other states with legalized sports betting, the age limit for wagering is 21.
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