Massachusetts Judge Gives Details About Injunction Against Kalshi

Massachusetts Superior Court Judge Christopher Barry-Smith has provided more details on a preliminary injunction against Kalshi. Barry-Smith says he intends to issue the injunction, which will require Kalshi to stop allowing users in Massachusetts to participate in its sports contracts.

While the injunction order has been delayed, Barry-Smith said it is coming. In a document highlighted by gaming lawyer Daniel Wallach, the judge wrote, “I intend to issue a preliminary injunction that focuses on my essential ruling: that Kalshi may not offer sports-related ‘contracts’ to persons in Massachusetts, directly or indirectly.”

He went on to say that after the injunction is issued, Kalshi will have 30 days to implement measures to comply with the ruling. Kalshi had previously requested 90 days and continues to argue that it is practically infeasible to ring-fence users in certain states.

Barry-Smith said that the injunction would “unquestionably be implemented with technological controls“.

Both parties – the Commonwealth of Massachusetts, which has brought the case against Kalshi, and Kalshi – have until February 4 to submit their proposed injunction orders.

If the two parties cannot agree on the details, Barry-Smith notes, “I will issue the preliminary injunction or schedule a prompt hearing.”

Kalshi Resists Ring-Fencing

Kalshi still hopes it will not have to implement the “technological controls” to block users in Massachusetts, or any other state. It has appealed against Barry-Smith’s ruling and filed an emergency motion for a stay of the preliminary injunction pending its appeal.

In its motion submitted to the court last week, it wrote, “A stay is warranted because, respectfully, Kalshi is likely to prevail on appeal as to the central contested issue of whether the Commodity Futures Trading Commission (the ‘CFTC’) retains exclusive jurisdiction, preempting state regulation, of transactions that take place on CFTC-regulated ‘designated contract markets.'”

The CFTC warned prediction market platforms that they may have to restrict users in certain states. At the end of September, the organization wrote a letter to companies stating that, “State regulatory actions and pending and potential litigation, including enforcement actions, should be accounted for with appropriate contingency planning.”

The correspondence came shortly after the Massachusetts Attorney General filed a lawsuit against Kalshi. The company, however, says that restricting users in the state would cause “irreparable harm.”

Turning Point for State Regulators?

If Massachusetts successfully forces Kalshi to restrict residents from wagering on its sports markets, it could be a catalyst that leads to several other states being blocked.

After Barry-Smith’s ruling, New York’s Assistant Attorney General Zachary Manley wrote to inform the court of the ruling, in the hope it would strengthen the state’s case against Kalshi.

Similarly, the Ohio Casino Control Commission filed the ruling as “supplemental authority” in support of its legal battle against Kalshi.

In addition to Massachusetts, Ohio, and New York, Kalshi is facing similar cases against regulators in Nevada, Connecticut, New Jersey, Maryland, and, most recently, in Tennessee. A block in one of these states could see all states follow.

Kalshi declined to comment on Barry-Smith’s ruling, but previously told CasinoBeats, “Prediction markets are a critical innovation of the 21st century, and like all innovations, they are initially misunderstood. We are proud to be the company that has pioneered this technology and stand ready to defend it in a court of law.”