U.S. District Judge Aleta Trauger issued a preliminary injunction blocking the Tennessee Sports Wagering Council from enforcing state gambling laws against Kalshi’s sports-event contracts. The immediate result is that Kalshi can continue operating in Tennessee while the litigation moves forward.
The decision hinged on federal preemption and the classification of Kalshi’s contracts under federal derivatives law. Judge Trauger concluded the contracts are likely “swaps” under the Commodity Exchange Act and therefore fall within the CFTC’s exclusive jurisdiction, not Tennessee’s gambling framework.
Why the court sided with federal oversight
The court found Kalshi showed a strong likelihood of success on the merits by demonstrating that its sports-event contracts meet the statutory definition of swaps traded on a regulated exchange. Because Kalshi operates as a Designated Contract Market, the ruling treated federal regulation as preempting Tennessee’s attempt to apply state gambling rules.
Judge Trauger identified specific incompatibilities between Tennessee’s sportsbook-style regime and the federal derivatives model governing Kalshi’s exchange. The opinion pointed to conflicts involving fee-based exchange structure versus sportsbook licensing and tax constructs, state age and self-exclusion requirements versus federal market norms, and the disruption that dual enforcement would cause to uniform CFTC oversight.
The court acknowledged the Supreme Court’s recent constraints on agency deference, referencing the 2024 Loper Bright line of cases, but still grounded its conclusion in statutory language and the exchange’s structure. The ruling framed the outcome as flowing from the Commodity Exchange Act’s text and market-design facts rather than from deference to agency interpretation.
What this means for the broader legal landscape
The injunction remains in place through adjudication, effectively pausing Tennessee enforcement for now. Operationally, this is a temporary shield, not a final resolution, because the underlying case and any appeals remain open.
The ruling aligns with federal-preemption outcomes cited in New Jersey but conflicts with decisions in Massachusetts and Nevada that treated similar contracts as gambling subject to state control. That divergence increases the likelihood of appellate review and elevates the probability of eventual Supreme Court consideration.
The opinion also fits into a broader federal-first posture, with the CFTC under Chairman Michael Selig actively supporting a unified federal framework in filings and outreach, as described in the text. For market operators and institutional participants, the decision strengthens the argument that event contracts can be offered under federal supervision, while leaving meaningful legal uncertainty as other jurisdictions continue litigating.
