Iowa Federal Judge Denies Kalshi Motion for Preliminary Injunction on Commodity Exchange Act Preemption

An Iowa federal judge denied Kalshi’s bid to block the state from regulating its sports-related event contracts under Iowa gambling law. U.S. District Judge Stephen Locher rejected the prediction market operator’s motion for a preliminary injunction, finding it unlikely to succeed on claims that the Commodity Exchange Act expressly preempts state rules. Kalshi filed the pre-enforcement lawsuit in March after a meeting with staff for Iowa Attorney General Brenna Bird.

As reported by Yogonet International, Locher determined Congress did not clearly intend the Act to override state gambling laws. “If Congress intended to pre-empt state gambling laws when it enacted and amended the Commodity Exchange Act, it should have been clear about that pre-emption,” Locher wrote. “The text of the Commodity Exchange Act does not meet the mark.”

Locher’s Reading of Statutory Text and Kalshi’s Conduct

Locher said the CFTC’s exclusive jurisdiction covers only swaps or contracts of sale of a commodity for future delivery. The statutory definition of a swap does not reference sports betting. In context, the opinion states it is easy to see the term “event” or “occurrence” applying to financial or asset markets such as interest rates or grain prices. It is harder to conclude Congress meant those terms to cover the outcome of a sporting event.

The ruling notes that in general parlance one would not describe the Minnesota Vikings winning a football game as an “occurrence” or “event.” Locher added that Kalshi should have known its contracts might be viewed as sports gambling. The company had advertised itself as “the first app for legal sports betting in all 50 states” yet made no apparent effort to consult the Iowa Attorney General or the Iowa Racing and Gaming Commission.

Any compliance expense, Locher wrote, “is a problem of the company’s own making. It should have proceeded with greater caution.” Bird called the decision “a victory for the rule of law and for protecting Iowans.”

Where the Risk Lies for Prediction Market Operators

The order lets Iowa continue treating Kalshi’s products as subject to state gambling rules while the full case proceeds. It does not decide whether enforcement will occur, whether Kalshi will appeal, or the final outcome on all claims. Operators face concrete risk when federal preemption arguments rest on statutory text that courts read as silent on sports outcomes. The decision makes clear that proceeding without first clarifying state regulators’ views can turn compliance costs into self-inflicted exposure.

Reporting: Yogonet International

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