Milbank LLP Litigation & Arbitration partner Will Havemann was named “Litigator of the Week” by The AmLaw Litigation Daily for securing a landmark win in the Third Circuit on behalf of Kalshi, a CFTC-regulated Designated Contract Market (DCM). The Third Circuit held that the CFTC has exclusive jurisdiction over Kalshi’s event contracts, including its event contracts related to sporting events, and affirmed a lower court’s preliminary injunction to prevent New Jersey from banning these contracts. The majority concluded that the Commodity Exchange Act preempts state laws, including New Jersey laws, that interfere with contracts traded on CFTC-regulated DCMs.
The Third Circuit is the first federal appeals court to rule on Kalshi’s preemption argument. Its decision is a bellwether for how prediction markets will be regulated in the US, and whether they will be subject to uniform regulation by one federal regulator or a patchwork of regulation by 50 different states. This is a precedent-setting win for Kalshi and other prediction markets as they face opposition from numerous states.
In an interview with The AmLaw Litigation Daily, Will discusses what was at stake for Kalshi in this appeal, its impact beyond Kalshi and New Jersey, and the key points of the winning argument.
“It’s hard to overstate how important this litigation is to Kalshi,” said Will. “Starting early last year, New Jersey and other states began threatening Kalshi with criminal penalties for offering event contracts, including contracts related to sports. Kalshi very much believes in regulation, but its exclusive federal regulator is the CFTC, and it can’t comply with a patchwork of 50 different states’ laws while operating a nationwide exchange. So, it is critical to reaffirm that the CFTC has exclusive jurisdiction to regulate derivatives exchanges like Kalshi.”
He also discusses the broader series of nationwide litigations, which include cases in 13 federal and state courts, seven appeals, two cases involving the Indian Gaming Regulatory Act, a group of cases brought by private LLCs seeking to recover under an 18th century gambling law (Statute of Anne), and a few class actions. Will notes that “this is one of the largest and most complex litigations” he has worked on and details how he and the team prepare for each case while coordinating Kalshi’s broader litigation strategy.
In addition to Will, the Milbank team advising Kalshi on its nationwide litigations is led by partners Josh Sterling, Neal Katyal, Katherine Fell, Gurbir Grewal, Grant Mainland, Andrew Porter, Matthew Laroche and Colleen Roh Sinzdak, with special counsel Nicole Valente and associates Samantha Ilagan and Davis Campbell, among many others.
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