Prediction market platform Kalshi has filed a lawsuit against regulators in the US state of Iowa, arguing that it acted preemptively due to the risk of an impending enforcement action targeting its sports event contracts.
The company lodged the suit in a federal court in Iowa on Wednesday against Brenna Bird, the state’s attorney general, as well as the Iowa Racing and Gaming Commission and its board. In the complaint, Kalshi claimed there is a “substantial risk” that Bird could pursue enforcement measures aimed at blocking its event-based trading contracts.
According to the filing, a representative from Kalshi had arranged a meeting with Bird that the company believed would focus on a tax bill currently being considered in the Iowa Legislature.
However, Kalshi said the meeting unfolded differently than expected. The representative was reportedly met by a group of attorneys — including Samuel Langholz, the state’s solicitor general — who questioned whether Kalshi’s federally regulated offerings might violate, or be preempted by, Iowa state law.
After the meeting, Kalshi said it contacted a representative from the office of Brenna Bird on Tuesday to seek confirmation that the Iowa attorney general did not plan to pursue enforcement action against the company.
According to the lawsuit, the representative declined to provide such assurances. “We will not give any assurances about potential future enforcement,” the official reportedly said in writing. Cointelegraph has reached out to Bird’s office and the Iowa Racing and Gaming Commission for comment.
Prediction markets clash with state regulators
The lawsuit against Iowa marks the latest legal battle for Kalshi as it disputes with several US state regulators over whether it can legally offer event-based contracts nationwide.
In the filing, Kalshi argued that federal law should take precedence over state regulations, claiming that as a designated contract market it falls under the “exclusive jurisdiction” of the Commodity Futures Trading Commission.
The company has advanced similar arguments in multiple legal disputes with state gambling regulators concerning the legality of sports event contracts. Many state authorities contend that these contracts — which allow users to speculate on the outcomes of sporting events — effectively constitute gambling and therefore require state-level licensing.
Courts across the United States have issued mixed rulings on the matter.
On Monday, a federal court in Ohio rejected Kalshi’s request to block regulators from taking action against its sports contracts, ruling that the company failed to demonstrate the contracts fell under the jurisdiction of the Commodity Futures Trading Commission.
Earlier this year, a federal court in Massachusetts prevented Kalshi from offering event contracts in the state. Meanwhile, Nevada filed a lawsuit against the company last month after an appeals court rejected Kalshi’s attempt to block the state from pursuing enforcement action.
However, federal courts in New Jersey and Tennessee have taken the opposite approach, temporarily siding with Kalshi and preventing state regulators from acting against the company’s sports event contracts.
