The United States Sixth Circuit Court of Appeals is set to consider whether a trial court erred in a decision regarding whether a state government can enforce its laws against Kalshi, but that state isn’t Ohio. In this instance, the main appellant is Tennessee Attorney General Jonathan Skrmetti.
Skrmetti announced on Wednesday that he filed the appeal of the US District Court for the Middle District of Tennessee’s decision to grant Kalshi injunctive relief barring Skrmetti and others from taking enforcement actions. The Sixth Circuit is the same venue that denied such protection to Kalshi in Ohio, and if that outcome happens again, another petition to the US Supreme Court could arise as a result.
Skrmetti asks Sixth Circuit to overturn district court decision on injunction
According to a Wednesday press release, the brief that Skrmetti filed with the Sixth Circuit represents Tennessee’s interest in the case “alongside a related case from Ohio.” The Sixth Circuit expedited the consideration of Kalshi’s appeal of that lawsuit on the merits when it denied Kalshi’s request to overturn the Southern District of Ohio’s decision to deny its request for injunctive relief.
Tennessee’s situation differs in that the district court granted that request against Skrmetti, Tennessee Sports Wagering Council (TSWC) Executive Director Mary Beth Thomas, and TSWC Chair William Orgel. Kalshi sued the defendants in January when the TSWC sent a cease-and-desist order demanding that it stop offering trades of contracts related to sporting events to people in the state.
Meanwhile, the Southern District of Ohio denied a similar request, making Kalshi the appellant in its dispute against state officials there. However, the Sixth will consider similar questions regarding whether the Middle District of Tennessee erred.
Skrmetti and others dispute court’s application of preemption
The defendant’s brief to the Sixth takes aim at the district court’s finding that federal law governing the regulation of swaps preempts Tennessee’s ability to regulate exchanges like Kalshi. The filing argues that, “nothing in the CFTC’s jurisdiction clause—or the CEA (Commodity Exchange Act)—supports finding express preemption, field preemption, or conflict preemption.”
The brief continues in stating, “the district court’s contrary holding overlooked basic elements of preemption law” like “it’s a textbook rule that ‘[t]he mere fact that state laws… overlap to some degree with federal [laws] does not even begin to make a case for conflict preemption.’” Additionally, Skrmetti and the co-defendants claim that “preemption ‘must stem from either the Constitution itself or a valid statute enacted by Congress.’”
The Sixth Circuit will need to decide whether it agrees with that assessment or whether it will allow potential enforcement actions in Tennessee as it did in Ohio. Either way, the ruling could set up another plea to the US Supreme Court.
Tennessee case could progress to Supreme Court attention
The US Supreme Court is already set to receive a request from New Jersey officials regarding their dispute with Kalshi. An appeal of Kalshi’s case against New Jersey Division of Gaming Enforcement Director Mary Jo Flaherty and others is on hold while Flaherty and her co-defendants ask the Supreme Court to review the Third Circuit Court of Appeals’ decision to uphold the trial court’s approval of Kalshi’s request for a preliminary injunction there.
Kalshi could also file its own petition for Supreme Court review after the Ninth Circuit Court of Appeals denied its request for a stay in a dispute between itself and Washington. Whichever side ends up on the losing end of the Sixth’s decision may add to that growing call for the Supreme Court to intervene.
