Locher's express preemption reading puts Kalshi on weaker ground

Judge Stephen Locher's ruling in Iowa did not arrive without a warning. When Kalshi filed its pre-enforcement suit in March — before Iowa had taken a single enforcement action against it — Locher noted in his opinion that the company had never bothered to ask the Iowa Attorney General or the Iowa Racing and Gaming Commission whether they considered its sports-related event contracts illegal gambling. It charged ahead. That fact sits at the center of his preliminary injunction denial, and it will sit at the center of every subsequent ruling that cites Iowa as precedent.

The legal question Locher resolved — or rather, declined to resolve in Kalshi's favor — is narrow but the narrowness is the point. Kalshi's preemption argument rested on what it called the Commodity Exchange Act's "express preemption clause." Locher found that clause insufficient to displace Iowa gambling law because Congress, in his reading, never made the displacement explicit. His standard is the one the Supreme Court has applied consistently in federalism cases: when a federal statute is said to preempt state law in a field states have traditionally regulated, the congressional intent to do so must be clear from the text. Locher found the text did not clear that bar.

His statutory reading goes further. The CEA's exclusive jurisdiction provision covers "swaps or contracts of sale of a commodity for future delivery." Locher concluded that the word "event" or "occurrence" in the swap definition was written with financial and commodity markets in mind — interest rates, grain prices — not the outcome of an NFL game. He wrote that in general parlance, a Vikings win is not an "occurrence" in the sense Congress meant. That linguistic analysis sounds modest. It is not. If it holds on appeal, it severs Kalshi's entire product line from the statutory definition that its preemption theory depends on.

What the consensus view has not fully absorbed is that Locher's ruling and the Ninth Circuit posture are not in tension — they are compounding. Kalshi has now received the same answer from courts approaching the same statute from two different directions. One route runs through express preemption. The other runs through the scope of CFTC exclusive jurisdiction. Both roads arrive at the same destination: a federal court declining to read the CEA as a bar against state gambling enforcement.

Underdog's simultaneous move — abandoning DFS licenses in seven states while filing federal preemption suits in five others — tells you what the industry actually believes about the state-by-state litigation trajectory. Stacie Stern said publicly that everyone can see the system is a mess and that the Supreme Court needs to decide. That is not a statement of legal confidence. It is a request for rescue from a doctrine that is losing in the district courts.

The standard Locher applied is Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996), and its progeny: in areas of traditional state police power, a federal statute's preemption of state law will not be inferred without clear statutory evidence. Whether the Eighth Circuit reads the CEA as satisfying that standard is what this litigation actually turns on.