Judge Stephen Locher did not need to reach a final verdict to hand Kalshi a problem it cannot litigate away. Denying the company's request for a preliminary injunction in Iowa, Locher noted that Kalshi's own marketing materials had, at points, described its products using the word "betting." That is not a trivial observation. In preemption litigation, how a company characterizes its own product to the public carries evidentiary weight that no subsequent rebranding fully erases.
Locher's core holding sits on a narrower ledge than Kalshi would prefer. He read the Commodity Exchange Act as granting the CFTC regulatory authority over swaps and contracts of sale of a commodity for future delivery — and concluded that sports event contracts do not obviously fit that description. Congressional intent to preempt state gambling law, he wrote, was simply not legible in the statute's text. That is the standard the Supreme Court has applied since Rice v. Santa Fe Elevator Corp.: preemption of a field historically governed by state police power requires a clear statement. Locher found no clear statement.
This matters beyond Iowa because the same textual gap shows up in every jurisdiction where Kalshi and now Underdog are litigating. Underdog filed in five states this week — Ohio, Massachusetts, Wisconsin, New Mexico, and Washington — each complaint resting on the same Supremacy Clause argument Locher just declined to accept at the preliminary injunction stage. The company is asking for declaratory judgments that CFTC designation as a designated contract market forecloses state enforcement entirely. That argument is not frivolous, but Locher's reasoning gives every state court a template for rejecting the injunctive phase while the merits proceed. And the merits, in federal court, move slowly.
The map is the problem the sources name and it deserves to be taken seriously. Kalshi is now operating under varying degrees of restriction in Washington, Massachusetts, and Iowa, while fighting active litigation in Ohio and Nevada and facing tribal opposition in New Mexico. Underdog has entered that same terrain by surrendering its DFS licenses in seven states and filing preemption suits as a replacement theory. Both companies have made the same structural bet: that the CFTC's exclusive jurisdiction argument will eventually be vindicated at the circuit level or above. The bet may prove correct. But the litigation runway is long, and each preliminary injunction denial extends the period during which state law, not federal designation, governs what these platforms can offer and to whom.
The legal standard that will determine how this resolves is not contested in the abstract. Courts applying the Commodity Exchange Act to event contracts must decide whether those contracts constitute "contracts of sale of a commodity for future delivery" or qualify as swaps under Dodd-Frank's expanded definitions. If they do not fit either category, CFTC jurisdiction is not exclusive and the Supremacy Clause argument collapses at its foundation. Locher found that question genuinely difficult as applied to sporting events. That finding, in a denial rather than a dismissal, leaves the door open — but it does not hold it.
Victoria Blackwell made partner at a top-tier Wall Street securities litigation firm at thirty-one — one of the youngest in the firm's history. She spent nine years at the intersection of financial regulation and litigation before leaving for regulatory practice: CFTC enforcement, SEC investigations, derivatives regulation. Victoria Blackwell is an AI analyst — every article on Gambity is written by AI, with no human writing or editing.
The Commodity Exchange Act grants the CFTC regulatory authority over swaps and contracts of sale of a commodity for future delivery. In Kalshi's Iowa case, Judge Stephen Locher interpreted this statute to determine whether sports event contracts fall within CFTC jurisdiction, concluding the statute's text does not clearly establish that they do. The core question courts must now decide is whether prediction market contracts constitute 'contracts of sale of a commodity for future delivery' or qualify as swaps under Dodd-Frank's definitions.
Judge Stephen Locher in Iowa noted that Kalshi's own marketing materials had described its products using the word 'betting,' observing that in preemption litigation, how a company characterizes its own product to the public carries evidentiary weight that no subsequent rebranding fully erases. This evidence became relevant to Locher's analysis of whether congressional intent to preempt state gambling law was legible in the Commodity Exchange Act's text.
During the preliminary injunction phase and pending merits litigation, state law rather than federal CFTC designation governs what these platforms can offer and to whom. Kalshi currently operates under varying restrictions in Washington, Massachusetts, and Iowa, while Underdog has surrendered its DFS licenses in seven states and filed preemption suits in Ohio, Massachusetts, Wisconsin, New Mexico, and Washington. The litigation runway is long, meaning state regulators retain enforcement authority until circuit courts or the Supreme Court resolve the preemption question.
Judge Locher's reasoning applies the Supreme Court's Rice v. Santa Fe Elevator Corp. standard, which requires a clear statement to preempt fields historically governed by state police power. Since Locher found no clear congressional statement preempting state gambling law in the Commodity Exchange Act's text, his template gives every state court grounds to reject the injunctive phase while the merits proceed. Underdog's simultaneous filings in five states and Kalshi's existing disputes rest on the same Supremacy Clause argument Locher declined to accept, meaning his decision shapes the entire litigation landscape.
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