Kalshi Loses Bid To Keep Mich. Gambling Suit In Fed. Court

Michigan federal court to Kalshi:

Go back to state court.

Judge Maloney cancels oral argument and remands the Michigan Attorney General's civil enforcement lawsuit vs. Kalshi back to state court, where a motion for preliminary injunction is already teed up against Kalshi.

Excerpts from the remand order:

1) "Plaintiff’s state law claims do not necessarily raise federal issues. State courts are perfectly capable of handling defenses based in federal law."

2) "Federal law does not completely preempt Plaintiff’s state law causes of action. Complete preemption arises in the rare circumstance where Congress legislates an entire field of law,” so “proving such exhaustive preemption by the federal government is exceedingly difficult.”

3) “Statutes creating complete preemption must ‘reflect clear congressional intent’ to ‘override[] all state law on the topic’ with language containing ‘extraordinary preemptive power.’”

4) “This is an 'exacting standard' requiring 'express terms,' and even express preemption provisions do not ordinarily meet it. The Supreme Court has only ever found that three statutes met the standard.

5)”Complete preemption thus requires both language that overcomes the 'exceptionally strong presumption against complete preemption' and a 'parallel federal cause of action' to which state law claims can be 'convert[ed].'”

6) “No other court has ever found that the CEA provides a parallel cause of action, and no court Kalshi presented its complete preemption theory to ever found complete preemption. See, e.g., Ohio Gambling Recovery, LLC v. Kalshi Inc., No. 4:25-CV-1573, 2026 WL 865788, at *5-6 (N.D. Ohio Mar. 30, 2026); Kentucky Gambling Recovery LLC v. Kalshi Inc., No. 3:25-cv-00054-GFVT, 2026 WL 596107, at *3 (E.D. Ky. Mar. 4, 2026); Nevada v. KalshiEX, LLC , No. 2:26-cv-00406- MMD-MDC, Dkt. No. 45, slip op. at 6-9 (D. Nev. Mar. 2, 2026); Massachusetts v. KalshiEX LLC , 1:25-cv-12595-RGS, Dkt. No. 34 (D. Mass. Oct. 28, 2025)."

7) “Both a motions panel of the Sixth Circuit and this Court have expressed skepticism that the CEA preempts the application of state gambling laws to exchange-traded contracts to nearly the extent that Defendant claims it does, even assuming that its products are 'swaps.'"

8) “The 'exclusive jurisdiction' language on which Defendant relies, id. § 2(a)(1)(A), exists “to separate the functions of the [Commodity Futures Trading] Commission from those of the Securities and Exchange Commission and other regulatory agencies.” Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran , 456 U.S. 353, 386 (1982). It was “intended only to consolidate federal regulation . . . in the Commission.”

9) “Defendant thus fails to establish complete preemption. It does not identify the necessary parallel cause of action and fails to identify language in the CEA which would overcome the strong presumption against complete preemption."

https://www.linkedin.com/in/daniel-wallach-a959a77/

https://www.law360.com/articles/2494125/kalshi-loses-bid-to-keep-mich-gambling-suit-in-fed-court