Fifth Circuit gets its first prediction market preemption case

Christopher Hebert sent a letter in December 2025 to every sportsbook licensed by the Louisiana Gaming Control Board. The message was unambiguous: offering prediction markets on sports constitutes sports wagering under Louisiana law, and doing so risks your license. Kalshi read that letter as a declaration of intent and, on October 23, filed in the Western District of Louisiana before Louisiana could move first.

The lawsuit names Hebert, Governor Jeff Landry, Attorney General Liz Murrill, and two officers of the state gaming enforcement apparatus as defendants. Kalshi is seeking a temporary restraining order and both preliminary and permanent injunctions. The mechanism is the Supremacy Clause — the argument that Louisiana's gambling statutes cannot reach a federally designated exchange regulated by the Commodity Futures Trading Commission, because the Commodity Exchange Act preempts them.

What makes the Louisiana filing structurally different from Kalshi's prior actions is the appellate jurisdiction it lands in. The Fifth Circuit has not previously ruled on prediction market preemption. That matters. Courts in other circuits have so far declined to grant Kalshi the preliminary relief it sought. The Fifth Circuit's record on federal preemption of state regulatory authority runs in a different direction, and Kalshi's legal team knows where it is filing.

Louisiana's position rests on two bills Landry signed in May that took effect August 1. House Bill 53 upgraded gambling-by-computer offenses to racketeering charges carrying up to fifty years. House Bill 883 expanded the statutory definition of illegal online gambling. Both were aimed at unlicensed offshore casinos and sweepstakes operators. Kalshi's complaint argues that Louisiana's enforcement posture treats federally regulated event contracts as falling within that net, even though the statutes contain an explicit exemption for futures and commodities instruments traded on a licensed exchange. Kalshi says it is that exchange. Louisiana says that exemption does not apply to sports.

The racketeering exposure is not theoretical. Under the bills, courts can freeze assets and shut down websites. Kalshi's complaint notes that payment processors, geolocation providers, and media affiliates are all potentially reachable. A state that has not yet filed an enforcement action has already created a legal environment in which Kalshi's entire commercial infrastructure in Louisiana is contingent on a court's willingness to hold the federal framework paramount.

The New York proceeding is moving on a parallel track. The New York State Gaming Commission is in Manhattan court seeking to compel production of records under subpoenas issued in July — documents covering sports event contracts, advertising, users under twenty-one, and corporate ownership. Kalshi's objection to the age-related requests is its cleanest line: a CFTC-regulated exchange does not operate under a gaming-age framework, and the Commission's subpoena presupposes a legal characterization Kalshi disputes. The New York Attorney General is simultaneously pursuing thirty-six billion dollars in a separate action.

The consensus read on these state actions treats them as harassment — jurisdictional overreach that a federal court will eventually swat down. I don't think that's where this lands, at least not cleanly. What Louisiana has done is pass statutes broad enough that the exemption question — whether Kalshi's contracts qualify as the futures instruments the law excludes — is a genuine statutory interpretation dispute, not an obvious preemption case. A federal district court judge in the Fifth Circuit could find the exemption language ambiguous and deny the injunction while the merits develop. That leaves Kalshi operating under the threat of a racketeering statute for however long the litigation runs.