Prediction market operators received more great news this week as Kalshi won an initial restraining order and a momentary injunction against the New Jersey Division of Gaming Enforcement (NJDGE). Last month, the NJDGE provided cease-and-desist orders to Kalshi and Robinhood, another forecast market provider.

Key Insights:

- New Jersey is one of a number of states that issued cease-and-desist orders to Kalshi and/or other prediction market suppliers over their just recently offered sports event futures contracts.

• This is the 2nd federal court, after the U.S. District Court for the District of Nevada, that has actually agreed Kalshi.
• Should forecast markets maintain their asserted right to provide sporting occasion agreements, without state policy or tax, it might adversely impact state sports wagering earnings.
  
  After receiving a cease-and-desist order from the NJDGE, Kalshi filed a motion for a preliminary limiting order and a short-term injunction with the U.S District Court for the District of New Jersey. In action, the NJDGE submitted an opposition to Kalshi's motion.
  
  The NJDGE argues that Kalshi made its sporting event agreements available to New Jersey homeowners in infraction of New Jersey sports wagering laws and guidelines. Kalshi is unlicensed by the state. As a prediction market operator, however, it is federally controlled by the Commodity Futures Trading Commission (CFTC).
  
  Kalshi argues that the state has no jurisdiction over its sporting occasion agreements as prediction markets are managed by the federal government. The NJDGE countered that sporting occasion agreements should not fall under the CFTC's jurisdiction as they are not monetary in nature. The vast majority of regulated futures contracts are based upon the future costs of commodities or other monetary securities.
  
  On both points, the judge sided with Kalshi.
  
  "I am encouraged that Kalshi's sports-related event contracts fall within the CFTC's special jurisdiction and am skeptical by the defendant's arguments to the contrary," Judge Edward Kiel composed. "Defendants argue that sporting events are without potential monetary, financial, or industrial consequence. On the record before me, I disagree."
  
  The next states in Kalshi's sights
  
  Like Nevada and New Jersey, Maryland released Kalshi a cease-and-desist order. And like Nevada and New Jersey, Kalshi filed a movement for a preliminary restraining order and a short-term injunction with Maryland's U.S. District Court.
  
  Meanwhile, Ohio expects that it might be the next recipient of a Kalshi claim. Ohio released a cease-and-desist order to Kalshi and 2 other forecast market companies late last month.
  
  While Kalshi appears to have the upper hand in these preliminary legal battles, the war over sports trading guideline will likely continue. For one thing, there's a lot of obscurity in federal law and guideline to keep lawyers and judges busy.
  
  The Federal Wire Act prohibits interstate sports wagering, which is one factor why sports wagering is legalized and controlled intrastate. Meanwhile, CFTC Rule 40.11(a)( 1) prohibits any occasion agreement "that involves, associates with, or referrals terrorism, assassination, war, video gaming, or an activity that is illegal under any State or Federal law ..."
  
  Also, there is simply excessive at stake for the states to just fold. For example, New Jersey generated $138.3 million in online tax revenues in 2015. Should forecast markets dominate, states stand to lose among their most recent and dependable earnings streams. Meanwhile, business like DraftKings and FanDuel, which have actually made substantial financial investments to protect state licenses and state regulatory approvals, have a lot to lose. Afterall, it will be tough to take on a forecast market operator that isn't needed to pay up to 50% in state taxes.