Kalshi Closes Out May With Legal Push Across Multiple Fronts
Kalshi ended May by filing new legal actions in Wisconsin and Minnesota. At the same time, it expanded its surveillance team amid growing scrutiny of prediction markets.
Kalshi closed out May with a series of legal developments, including a lawsuit against Minnesota, a bid to join the CFTC’s Wisconsin case, and a request for an immediate appeal in its dispute with the Ho-Chunk Nation. The company also expanded its surveillance team by hiring a former FBI analyst.
Kalshi Seeks to Join Federal Government’s Wisconsin Case
On May 28, Kalshi filed a motion to intervene in the federal government’s lawsuit against Wisconsin.
Kalshi seeks to become a plaintiff alongside the U.S. Department of Justice and the CFTC in litigation challenging Wisconsin’s efforts to apply its gambling laws to federally regulated event contracts.
As with other cases, Kalshi argued that Wisconsin’s enforcement efforts improperly attempt to regulate contracts traded on a federally regulated exchange. The company argued that those efforts also conflict with the CFTC’s exclusive jurisdiction under the Commodity Exchange Act.
Kalshi also cited recent victories in New Jersey, Arizona, and Tennessee. The federal courts issued preliminary injunctions preventing state authorities from enforcing gambling laws against the company’s event contracts.
Kalshi Pursues Appeal in Ho-Chunk Nation Case
Also in Wisconsin, Kalshi asked a federal court on May 29 to certify an immediate appeal in its ongoing dispute with the Ho-Chunk Nation.
The request follows a May 11 ruling that denied portions of Kalshi’s motion to dismiss. The court found that the Ho-Chunk Nation plausibly stated claims under the Indian Gaming Regulatory Act (IGRA) over sports event contracts accessible on tribal lands.
Kalshi argued that the decision raises novel legal questions, including whether tribes can regulate derivatives traded on federally regulated designated contract markets. The company also argued whether alleged violations of tribal gaming ordinances can form the basis of IGRA claims.
The company asked the district court to certify the ruling for interlocutory appeal. This step would allow Kalshi to seek review from the U.S. Court of Appeals for the Seventh Circuit.
Minnesota Lawsuit Adds Another Front
The Wisconsin filings followed Kalshi’s lawsuit against Minnesota, which was filed on May 27.
The company sued after Minnesota enacted a second prediction market ban measure. The new law replaced earlier prediction market provisions that had already triggered a separate federal lawsuit brought by the CFTC.
Both complaints argue that the new law criminalizes federally approved contract categories. Those include traditional derivatives markets, such as longstanding hedging and risk-management products tied to weather and agricultural markets.
Former FBI Analyst Joins Surveillance Team
Alongside its legal filings, Kalshi has expanded its compliance and market surveillance operations.
According to Reuters, the company hired former FBI intelligence analyst Tyler Neff to its surveillance team. Neff previously spent seven years on a white-collar crime squad in the FBI’s New York field office before working at the New York Stock Exchange, Wedbush Securities, and Canaccord Genuity.
Reuters reported that Neff will report to Head of Enforcement and Legal Counsel Robert DeNault and help oversee Kalshi’s market surveillance efforts. The hire follows several other recent additions from financial institutions, including Morgan Stanley and Nasdaq.
The focus on surveillance comes amid increased scrutiny of prediction market integrity and several high-profile incidents involving suspicious trading activity.
Last week, federal authorities charged a Google software engineer with insider trading for allegedly using confidential company data to profit more than $1.2 million on Polymarket.
June Opens Where May Left Off
The activity surrounding Kalshi at the end of May is continuing into June, with key deadlines approaching in two of the company’s ongoing legal battles.
In Ohio, the state’s response brief is due June 4 in Kalshi’s appeal before the Sixth Circuit. The company filed its opening brief on May 5.
Meanwhile, another deadline arrives in the Ho-Chunk Nation case. Kalshi’s response to the tribe’s amended complaint is due June 5.
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