Case 1:25-cv-02152-ESK-MJS Document 15 Filed 04/18/25 Page 30 of 51 PageID: 151
CFTC’s “[e]xclusive federal jurisdiction over exchange-traded derivatives does not mean such state interests must give way to [an entity’s] desire to run an elec- tion gambling operation on a regulated exchange, thereby circumventing well- founded state laws designed to protect the democratic process.” CFTC’s Br. at 54–55, KalshiEX LLC v. CFTC , No. 24-5205, 2024 WL 4512583 (D.C. Cir. Oct. 16, 2024). Put simply, “the CEA should not be an escape hatch from state law interests.” Id. at 53. It would turn “the [CFTC]’s task of evaluating contracts and transactions on its head” to say that the CEA preempts the entire field of deriv- atives trading; then no election-related event contract could involve conduct that is unlawful under state law. Id. at 54. The same reasoning applies to sports-wagering laws here. Only a sports- wagering licensee or its operator—authorized to offer sports betting under the Sports Wagering Act—may offer sports wagers in New Jersey. N.J. Stat. Ann. § 5:12A-11(c). Because Kalshi is offering event contracts involving sports wagers in New Jersey without obtaining proper authorization, Kalshi’s event contracts involve an “activity that is unlawful” under New Jersey law. 7 U.S.C. § 7a- 2(c)(5)(C)(i)(I). Far from being preempted by the CEA’s special rule, that provi- sion’s reliance on state law demonstrates exactly the opposite: Congress wanted state laws to apply when those laws affect event contracts. Otherwise the special rule’s prohibition on event contracts involving “activity that is unlawful” under “State law” would never apply. To be sure, the CFTC may examine whether an activity is unlawful under state law in determining whether to allow the listing of event contracts on
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