Federal judge refuses Kalshi’s request to block Iowa gambling enforcement

A federal judge in Des Moines has rejected Kalshi’s attempt to block Iowa from enforcing state gambling laws against the prediction market platform, finding the company unlikely to show the Commodity Exchange Act (CEA) preempts state law. The ruling is the latest in a series of recent court decisions testing whether event-based contracts offered by platforms like Kalshi are federal “swaps” or state-regulated gambling.

What the judge decided

U.S. District Judge Stephen Locher denied Kalshi’s motion for a preliminary injunction, concluding Kalshi had not shown it was likely to succeed on the merits of its claim that the CEA expressly preempts Iowa’s gambling laws. According to the order quoted by Courthouse News, Locher said the CEA’s text does not clearly displace state police powers over gambling and noted the statute’s exclusive jurisdiction language appears limited to “swaps or contracts of sale of a commodity for future delivery.” The opinion observed that the statutory definition of “swap” describes agreements tied to the occurrence or extent of an event with financial or commercial consequences, but it does not explicitly reference sports betting or similar wagers.

Key reasoning in the opinion

• Locher emphasized that if Congress had intended to preempt state gambling laws when it enacted and amended the Commodity Exchange Act, it would have done so plainly; he concluded the statute’s language “does not meet the mark.” (Source 2)
• The judge questioned Kalshi’s reading that the CFTC’s exclusive jurisdiction automatically blocks state action, suggesting the provision might simply designate the CFTC as the lead federal regulator over certain contract markets rather than create broad preemption. (Source 2)
• Locher applied a substance-over-labels approach, noting it is harder to read common parlance about sports outcomes into the statutory wording for swaps and giving examples showing why a sporting result does not obviously qualify as an event contemplated by the CEA’s definition. (Source 2)

Court weighed Kalshi’s conduct and procedural posture

The judge also criticized Kalshi for proceeding with its business despite indications from Iowa officials that regulators viewed its sports-related contracts as potentially unlawful. The opinion said Kalshi did not attempt to obtain clarification from Iowa’s attorney general or the Iowa Racing and Gaming Commission before seeking injunctive relief and faulted the company for assuming the risk of regulatory enforcement. Locher treated the failure to exhaust those avenues as a factor weighing against an injunction. (Source 2)

How this fits into the wider legal fight

The Iowa decision follows a pattern of mixed outcomes for Kalshi and other prediction market firms in federal court. Recent rulings around the country have split, with judges in several states allowing state gambling laws to apply to prediction markets and other courts finding federal regulation could preempt some state actions.

• Courts in Utah, Nevada, Maryland, Ohio, New York and Wisconsin have at times ruled against Kalshi or allowed state enforcement, while other decisions in New Jersey, Tennessee, Arizona and Minnesota have favored the company. (Sources 4, 5)
• The Ninth Circuit recently characterized Kalshi’s sports contracts as sports betting for purposes of a preliminary injunction request, concluding those contracts likely fall outside the CFTC’s “swap” definition — a ruling that creates circuit-level precedent across much of the western United States. That panel also noted Kalshi’s advertising describing itself as offering sports betting. (Source 6)
• At the same time, the Third Circuit took a different view in a separate case involving New Jersey, producing a circuit split that could ultimately require Supreme Court resolution. (Source 6)

Practical implications for Kalshi and states

Locher’s ruling means Iowa officials can pursue enforcement under the state’s gambling statutes if they choose. The judge’s skepticism about Kalshi’s preemption theory and comments about the company’s conduct suggest businesses offering sports-related event contracts may face state-level risk unless Congress or the CFTC clarifies the regulatory framework.

State attorneys general and local governments have been active in this area: Iowa Attorney General Brenna Bird praised the decision as protecting Iowans and said out-of-state platforms cannot use labels to skirt state law. City and state actions elsewhere — including recent lawsuits by Baltimore and enforcement efforts in multiple states — show municipalities and states are asserting consumer-protection and licensing arguments alongside gaming-law claims. (Sources 2, 5)

Unresolved issues and next steps

• Kalshi has several parallel and pending cases across the country. The company’s options include appealing adverse decisions and seeking relief in appellate courts; the Tenth Circuit and Ninth Circuit rulings referenced in recent coverage indicate appeals are already in play. (Sources 3, 6)
• The CFTC has taken positions supportive of federal oversight for prediction markets in other matters and has initiated litigation against some states, and it has proposed regulatory changes such as revising Rule 40.11. Those federal regulatory moves could affect the litigation landscape but, as courts have noted, proposed regulations are not binding until finalized. (Sources 5, 6)
• Because federal courts are split, the question whether sports-related event contracts qualify as federally preemptive swaps may ultimately land before the U.S. Supreme Court unless Congress amends the statute. (Source 6)

Timeline of recent, relevant rulings (select)

1. Early-to-mid 2026: Multiple district courts across several states issue mixed rulings on whether prediction markets’ sports contracts are subject to state gambling laws. (Sources 4, 5, 6)
2. August 2026: A federal judge in Utah declined to block that state’s enforcement of its anti-gambling laws against prediction markets. (Source 4)
3. September 2026: The Ninth Circuit panel upheld a decision allowing Nevada to apply gaming law and issued a decision treating Kalshi’s sports contracts as bets rather than swaps. (Source 6)
4. September 8, 2026: U.S. District Judge Stephen Locher denied Kalshi’s preliminary injunction request in the Southern District of Iowa. (Source 2)

What parties have said

Iowa Attorney General Brenna Bird issued a statement praising the ruling as a victory for the rule of law and warning that platforms cannot “invent a loophole to ignore state law.” Kalshi did not provide a comment to Courthouse News in the immediate aftermath of the ruling. (Source 2)

Bottom line

The Des Moines ruling underscores that, absent clear congressional language or a final regulatory regime from the CFTC, courts are likely to look closely at the substance of prediction-market products rather than accepting platform labels. For Kalshi, the decision increases the company’s exposure to state-level enforcement in Iowa and adds to a string of decisions this year that have narrowed the legal room for platforms offering sports-related event contracts without state gambling licenses.