KalshiEx LLC v. Martin, Case No. 25-cv-1283-ABA (D. Md. decided Aug. 1, 2025) – A federal district court correctly rules that Kalshi’s sports wagering contracts are not exempt from state regulation. The decision reverses a recent judicial trend and, if upheld, will help ensure that state protections for those lured into sports gambling remain applicable.
The betting platform KalshiEx LLC (Kalshi) sparked controversy in 2023 when it began offering wagers on the outcome of congressional elections, posing a host of threats to election integrity, investors, and the ability of the Commodity Futures Trading Commission (CFTC) to do its job policing the legitimate derivatives markets. After the CFTC rejected that contract, Kalshi went to court, securing a win in the D.C. district court, which read the applicable law far too narrowly. The CFTC appealed to the D.C. Circuit (where Better Markets weighed in) but then abandoned the case after the new Administration was installed. Kalshi proceeded to offer a wide range of contracts, including wagers on sporting events, without any compliance with state gaming laws. State gaming commissioners began ordering Kalshi to cease and desist or comply with their laws.
Kalshi has filed numerous suits to fend off state regulation of its sports gaming contracts, scoring a number of early wins in Nevada and New Jersey federal courts. But in this case, the court held that Maryland’s laws on gaming are not exempt from (or preempted by) the federal Commodity Exchange Act (CEA). The court correctly held that Kalshi is unlikely to show that it is free to ignore Maryland law. Specifically, the court explained that Congress never intended to override all state laws when it wrote the CEA. As a result, there is no “field preemption.” Second, the court held that it is not impossible for Kalshi to comply with both federal and state requirements, so “conflict preemption” is also absent. And, without deciding the issue, the court left open the additional argument that Kalshi’s contracts aren’t even the type of derivative that would be subject to preemption under the CEA.
The court’s decision rightly rejects Kalshi’s attempt to use federal law as a shield against important state requirements that protect everyday Americans who venture into the gaming markets. It’s also a positive outcome as it may help steer other courts in the right direction. Kalshi has appealed the decision to the Fourth Circuit, but at least for now, Kalshi’s gaming activities in Maryland will continue to be subject to licensing and oversight by the Maryland gaming commissioner. That means important safeguards will remain in place, from age restrictions to fair advertising requirements about the gaming activities available on Kalshi’s platform.
Powell v. SEC, Case No. 24-1899 (9th Cir. decided Aug. 6, 2025) – Appellate court sensibly upholds longstanding SEC rule that prevents wrongdoers who wish to settle enforcement actions from publicly denying the allegations against them. The decision helps protect the SEC’s ability to maintain a strong enforcement program that can protect investors and markets through the efficient use of settlements.
Since 1972, the SEC has followed a policy (set forth in Rule 202.5(e)) that limits the right of a settling defendant in an SEC civil or administrative enforcement action to deny the SEC’s allegations. The modest remedy for a violation of the rule is that the SEC can seek to reopen the enforcement proceeding. In this case, the SEC received a petition to amend the rule to eliminate the no-deny provision. After the SEC denied that petition, individuals subject to the rule and a number of organizations challenged that denial in court.
The Ninth Circuit rightly held that the rule is not, at least on its face, a violation of the First Amendment right of free speech. The rationale for the court’s decision was the well-established principle that people may, and often do, waive constitutional rights, just as they do in criminal cases through plea bargains. The court displayed sensitivity to the First Amendment concerns presented, allowing that under some specific circumstances, waivers may not be fully voluntary or knowing, thus raising constitutional concerns. However, the court noted that such issues are better resolved in specific, “as-applied” cases rather than in a “facial” challenge to the rule. The court also rejected other challenges to the rule, holding that the SEC had statutory authority for the rule; that the SEC was not required to engage in notice and comment rulemaking to adopt the rule since it was “best viewed as one of policy, procedure, or practice, which is exempt from the notice-and-comment requirements”; and the SEC provided an adequate explanation for the rule.
Although the court based its decision on legal grounds, it recognized the policy considerations at issue. It noted the SEC’s view that it should not be required either to try cases in the press or to lose the opportunity to pursue findings of fact if a defendant denies the allegations post-settlement. Moreover, the court recognized that abolishing the rule could have a number of adverse consequences in terms of SEC enforcement, including more insistence on admissions, fewer settlements, more trials, and fewer enforcement actions overall. Thus, the outcome was sound as a matter of law, and it left intact a useful enforcement policy.
National Treasury Employees Union v. Vought, Case No. 25-5091 (D.C. Cir. decided Aug. 15, 2025) – Appellate court clears the way for the Consumer Financial Protection Bureau (CFPB) to be gutted, disabling one of the most effective champions of consumer protection in the nation’s history. The loss of the CFPB will leave all Americans more exposed to predatory financial practices in the coming years, costing them billions of dollars and untold financial pain.
Soon after President Trump took office, the acting directors of the CFPB took draconian steps to demolish the agency. Those actions included terminating huge swaths of employees, cancelling contracts, declining additional funding, vacating its headquarters, and requiring advance approval for any agency work. The plaintiffs in the case included CFPB employees who were terminated as well as organizations that depend on services provided by the agency to assist and educate consumers. They sued to stop what they describe as an unlawful decision to “shut down” the Bureau.
In a thorough and well-reasoned opinion, the U.S. District Court for the District of Columbia found that the Administration’s efforts to dismantle the CFPB were likely in violation of the Separation of Powers doctrine because they undermined Congress’s legislative authority to establish the CFPB. It entered a preliminary injunction to halt the destruction of the agency while the case was litigated. National Treasury Employees Union V. Vought, Case No. 1:25cv00381 (D.D.C. preliminary injunction entered Mar. 28, 2025). Unfortunately, on August 15, the D.C. Circuit reversed the lower court and vacated the preliminary injunction. It held 1) that the district court lacked jurisdiction to consider the employees’ claims because they must proceed through the specialized-review scheme established in the Civil Service Reform Act, and 2) the plaintiffs’ other claims did not target final agency action reviewable under the Administrative Procedure Act nor unconstitutional action reviewable in equity.
The CFPB was established in the 2010 Wall Street reform and consumer protection law known as “Dodd-Frank” to protect Americans from fraud and abuse at the hands of firms—from the large banks to the payday lenders—that sell a wide variety of financial products and services. The agency was an extraordinary success, writing strong rules, bringing tough enforcement actions, and securing over $20 billion in relief for millions of Americans wronged by the financial services industry. And that’s why the industry and its allies in the Trump Administration have targeted it for demolition. The court’s decision allows that destruction to continue, to the detriment of all Americans who rely on financial products and services.
