A federal judge in Tennessee has temporarily blocked the state from enforcing gambling laws against prediction market operator Calci’s sporting event contracts.
The ruling, issued Thursday by Judge Aleta Trauger of the U.S. District Court for the Middle District of Tennessee, allows Calsi to continue offering sports-related event deals to users in the state while its lawsuit against Tennessee regulators proceeds.
Trauger said Carsi’s argument that federal commodity law pre-empts Tennessee’s attempt to regulate sports markets as illegal gambling is likely to succeed.
The court concluded that Kalsi’s sporting event contract was a “swap” under the Commodity Exchange Act, which confers exclusive jurisdiction on the U.S. Commodity Futures Trading Commission (CFTC), and held that Tennessee’s enforcement efforts would likely be preempted under the conflict preemption doctrine.
While the injunction applies to identified state officials, the Tennessee Sports Wagering Council itself was removed on grounds of sovereign immunity and Mr. Carsi was ordered held on $500,000 bail.
long-term conflict between nations
The Tennessee case is the latest chapter in a broader conflict over how event contracts are handled in the United States.
A previous temporary restraining order from Trauger had already halted enforcement of a Tennessee cease-and-desist order that alleged Kalsi was operating an unlicensed sports betting operation, ordered him to stop providing sporting event contracts to Tennessee customers, void those contracts and refund deposits, and threatened fines and further legal action.
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Carsi has similarly filed cease-and-desist actions targeting its events market in federal courts in multiple states, including Nevada, New Jersey and Connecticut, with courts reaching different conclusions on whether to grant preliminary relief.
CFTC steps in to protect prediction markets
The injunction is also subject to changing federal circumstances as the CFTC moves to assert its dominance over prediction markets.
In a video message Tuesday, CFTC Chairman Michael Selig said the CFTC has filed an amicus brief defending its “exclusive jurisdiction” over prediction markets and warned state officials that the commission will meet them in court if they try to undermine federal oversight of these derivatives markets.
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