Montana becomes latest state to dodge Kalshi injunction request

Kalshi faces legal vulnerability in another state as United States District Judge Donald W. Molloy refused to implement an injunction that could have handcuffed Montana officials from enforcing the state’s gambling laws. Kalshi can appeal the decision but law enforcement in the state could move forward on that premise for the time being.

However, Montana’s lack of interest in the case signals that they might not take advantage of the window. The decision still signals another defeat for Kalshi even if that proves to be the case.

(Photo illustration by Cheng Xin/Getty Images)

Kalshi suffers setback in case against Montana

Molloy’s decision ends the stay that had been in place for Kalshi’s litigation against Montana officials, but does so in a way that introduces a vulnerability for Kalshi. The injunction request denial that accompanied the stay lift means that there are no legal barriers to Montana Attorney General Austin Knudsen from taking action against Kalshi for potential violations of the state’s gambling laws.

Kalshi can appeal that decision, but doing so is complicated. Montana is within the jurisdiction of the US Ninth Circuit Court of Appeals.

That court has already denied similar petitions involving Kalshi’s disputes with other states. There are likely to be no new questions of substance before the court in a possible appeal of the Montana ruling. Further complicating that premise is that Knudsen has so far shown no interest in pressing the issue.

Molloy orders Montana to respond to Kalshi complaint

Kalshi’s litigation against Knudsen has been unique among disputes between the prediction market exchange and state government officials in that both parties have essentially agreed to act indifferently toward each other for months. The parties filed joint motions to implement the stay in June and two petitions to extend it, the second of which led to Molloy’s recent order.

Molloy included a provision that Knudsen has to respond to Kalshi’s lawsuit within 21 days. However, Knudsen still has a lot of leeway to determine how to respond.

The options include a robust defense of Montana’s sovereignty and arguing that the state’s gambling laws restrict Kalshi. Knudsen could also settle with Kalshi, resulting in Kalshi withdrawing its complaint.

There are more options between those extremes. Regardless of the parties’ next moves, Molloy’s order pushes the narrative that Kalshi’s legal arguments are losing legitimacy forward.

Kalshi’s legal tactics suffer another loss

Molloy stated that Kalshi was not eligible for injunctive protection because it failed to establish that it would suffer irreparable harm in the absence of that relief. Part of the rationale for that holding was the lack of direct threats of enforcement action from Knudsen and other Montana officials.

However, Molloy pointed out that Kalshi’s participation in the stay filings also weakened its ask for injunctive relief. Molloy did dismiss that request without prejudice, though, so Kalshi can revisit that motion if it desires to do so.

Molloy’s order adds to a streak of court defeats for Kalshi, including recent injunction request denials involving Connecticut, New York, and Utah. Pending further developments in this case, it strengthens the precedent that state governments wield authority over prediction market trading within their borders.

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