Commodities Exchange Act (CEA); Sports-event contracts; Statutory definition of “swap”; 7 USC § 1a(47)(A)(ii); Commodity Futures Trading Commission’s (CFTC) exclusive jurisdiction; § 2(a)(1)(A); Equitable cause of action; Ex parte Young; Supremacy Clause; Express, field & conflict preemption; Preliminary injunction

The court held that plaintiff-Kalshi’s sports-event contracts are not “swaps” under the CEA and, even assuming they are, the CEA neither expressly nor impliedly preempts Ohio’s or Tennessee’s gambling laws. Kalshi operates a CFTC-regulated designated contract market (DCM) and began offering contracts allowing customers to take positions on the outcomes of sporting events. After Ohio and Tennessee regulators sought to enforce their sports-gambling laws against Kalshi, it sued the state officials and sought preliminary injunctions on preemption grounds. The Ohio district court denied relief, while the Tennessee district court granted a preliminary injunction. On appeal, the court first concluded that Kalshi could maintain an equitable preemption action against the state officials because it was seeking “‘the standard, well-established remedy of an injunction against’” allegedly preempted state law, and the CEA did not displace that cause of action. It next found that the contracts did not satisfy the statutory definition of a swap because an event must be “intrinsically associated with a financial consequence” such that hedging risk or deriving pricing information would be beneficial. Kalshi’s sports-event contracts instead had, at most, “downstream economic consequences,” which were “too attenuated, indirect, and speculative” to qualify. The court also rejected Kalshi’s alternative contention that the CFTC had exclusive jurisdiction over the contracts even if they were not swaps, holding that “involving swaps” modifies the entire statutory series of accounts, agreements, and transactions. Further, assuming the contracts were swaps, the court nevertheless determined that the CEA did not expressly preempt the state laws because its exclusive-jurisdiction provision displaces only “direct regulatory and enforcement authority over licensing and operation of” DCM transactions, while the gambling laws merely incidentally burdened them. It further concluded that field preemption did not apply because the CEA’s savings clauses and express preservation of state authority showed Congress had not occupied the field, and conflict preemption failed because compliance with both regimes was possible and the state laws did not obstruct Congress’s objectives. Thus, Kalshi failed to establish a likelihood of success on the merits. Affirmed in the Ohio case, vacated in the Tennessee case, and remanded.