2. Preemption Kalshi argues that the CEA preempts Tennessee’s efforts to regulate its sports event contracts. 16 When state and federal laws conflict, the Supremacy Clause of the U.S. Constitution “‘provides a clear rule’ that federal law wins out.” Churchill Downs , 162 F.4th at 637 (quoting Arizona v. United States , 567 U.S. 387, 399 (2012)). Preemption can be express or implied, and implied preemption takes two forms: field and conflict. Id. at 637–38. 17 Kalshi argues that all three categories of preemption apply in this case. (Doc. No. 7 at 16–26; Doc. No. 41 at 9–12.) The defendants argue that federal law does not preempt their regulation of Kalshi’s sports event contracts. (Doc. No. 34 at 30–38.) Because the court can rule solely on conflict preemption, it will not address express or field preemption. 18 Accord Churchill Downs , 162 F.4th at 638. Under the doctrine of conflict preemption, “federal law preempts state law if the two ‘directly conflict,’” which occurs when complying with both is “impossible,” or when “state law ‘stand[s] as an obstacle to the accomplishment’ of Congress’s objectives.” Id. (first quoting PLIVA, Inc. v. Mensing , 564 U.S. 604, 617 (2011); and then quoting Kansas v. Garcia , 589 U.S. 191, 210– 11 (2020)). Kalshi is likely to succeed on either conflict preemption theory. 16 The court does not reach Kalshi’s argument that “Tennessee law does not permit the SWC to enforce state gambling laws against Kalshi.” (Doc. No. 7 at 26–28.) 17 As Kalshi points out, however, the Supreme Court has stated that categories of preemption are not “rigidly distinct” and has suggested that “‘field’ preemption may fall into any of the categories of express, implied, or conflict preemption.” Crosby v. Nat’l Foreign Trade Council , 530 U.S. 363, 372 n.6 (2000) (citations omitted).) 18 Other courts that have addressed field preemption in analogous cases have reached conflicting results. Contrast Kalshi D. Nev. I , 2025 WL 1073495, at *6 (“[B]ecause Kalshi is a CFTC-designated DCM, it is subject to the CFTC’s exclusive jurisdiction and state law is field preempted.”), and Kalshi D.N.J. , 2025 WL 1218313, at *6 (“[A]t the very least field preemption applies[.]”), with Kalshi D. Md. , 793 F. Supp. 3d at 684 (“Kalshi has not shown a likelihood of success on the merits that the CEA has the effect of field-preempting the regulation of sports-event contracts that are traded on DCMs.”).
18
Case 3:26-cv-00034 Document 48 Filed 02/19/26 Page 18 of 25 PageID #: 886
Made with FlippingBook - Online catalogs