A federal judge in Tennessee has granted a key procedural win to prediction market operator Kalshi, temporarily blocking state officials from enforcing gambling laws against the CFTC-regulated platform as a broader legal fight plays out. U.S. District Judge Aleta A. Trauger issued a preliminary injunction finding Kalshi is likely to prevail on its core claim: Kalshi’s sports-related event contracts qualify as federally regulated derivatives—“swaps” under the Commodity Exchange Act—rather than as state-level gambling. The order prevents the Tennessee Sports Wagering Council from taking enforcement action while the lawsuit continues, giving Kalshi breathing room to make its case in court. Kalshi runs as a designated contract market overseen by the Commodity Futures Trading Commission, offering tradable event-based contracts that let users take positions on real-world outcomes, including sports events. Tennessee regulators had sent cease-and-desist letters arguing those sports markets are illegal, unlicensed sports betting. The federal court’s reasoning emphasized that subjecting Kalshi to both federal derivatives oversight and state gaming rules could disrupt the uniform regulatory framework Congress created for derivatives. The decision comes amid a fragmented national landscape. In Nevada, the Nevada Gaming Control Board has already launched a civil enforcement action accusing Kalshi of unlawful wagering, while other states have reacted inconsistently. That patchwork of rulings and enforcement actions underscores the larger jurisdictional clash between federal derivatives regulators and state gaming authorities. For the crypto and fintech communities, the case is worth watching. While Kalshi itself is not a crypto exchange, the court’s treatment of event contracts as swaps could influence how regulators and courts classify and oversee crypto-native prediction markets, tokenized derivatives, and other innovative financial products. A federal preemption ruling in Kalshi’s favor could steer future disputes toward the Commodity Exchange Act and the CFTC rather than state gaming statutes. The injunction is temporary, and the litigation will determine whether this ruling becomes a lasting precedent. Until then, Kalshi has secured a pause on Tennessee enforcement—but the broader regulatory map for prediction markets and related products remains unsettled. Read more AI-generated news on: undefined/news