Kalshi’s Montana lawsuit is dismissed, but enforcement remains possible

Kalshi’s federal challenge to Montana gambling enforcement has been dismissed, ending the active court case while leaving the state able to pursue the company later under specified conditions.

The U.S. District Court for the District of Montana dismissed KalshiEX LLC’s claims against Montana Lottery Commission defendants Tony Harbaugh, Jon Metropoulos, Steve Morris, Leo Prigge and Janna Taylor with prejudice on Sept. 21. Claims against Attorney General Austin Knudsen, Alex Sterhan and the Montana Gambling Control Division were dismissed without prejudice.

The order required each side to bear its own costs, made pending motions moot and vacated the case deadlines. It followed a joint stipulation filed by Kalshi and the state officials on Sept. 17.

The settlement did not amount to a permanent bar on Montana enforcement. Under the parties’ agreement, Kalshi withdrew its claims while state gambling authorities agreed not to commence or pursue civil or criminal enforcement, investigations, cease-and-desist proceedings or other administrative action over its event contracts during a defined period tied to further Ninth Circuit review.

Montana Right Now reported that the state would have to give Kalshi 30 days’ notice before taking potential future legal action. DefiRate’s account of the proposed stipulation said the arrangement preserved Attorney General Knudsen’s independent authority to initiate enforcement and did not grant Kalshi immunity from Montana law.

As covered in our report last week, Montana had already agreed to pause its enforcement activity against Kalshi while the company sought further review of a Ninth Circuit decision concerning its Nevada operations.

Kalshi filed the case, KalshiEX LLC v. Knudsen, on April 12, seeking declaratory and injunctive relief to prevent Montana from enforcing its gambling laws against the company. The court docket classifies the action under federal commodity-exchange regulation and other statutory claims.

The dispute followed a cease-and-desist letter sent by the Montana Department of Justice’s Gambling Control Division the previous year. The division alleged that Kalshi was violating state gambling laws, while Kalshi has argued that federal law controls and that its event contracts are financial swaps traded with other users.

The litigation had been paused while the parties held discussions. The court stayed deadlines in April, extended that stay for 60 days in June, then lifted it on Aug. 27 after declining to extend it again. On the same day, it denied Kalshi’s preliminary-injunction motion without prejudice and directed Montana to answer or otherwise respond within 21 days.

Kalshi offers contracts whose value turns on whether future events occur, including political contests and sports games. Correct predictions result in payouts, while unsuccessful buyers lose the money paid for their contracts.

The Montana case sits within a broader regulatory dispute over those products. Numerous states and tribal entities have alleged that Kalshi violates gambling rules, while the company has maintained that its market structure places the contracts outside conventional gambling regulation.

The temporary non-enforcement arrangement is tied to Kalshi’s request for en banc Ninth Circuit review of Kalshi v. Assad, in which a Ninth Circuit panel concluded that sports event-contract trading on the platform was legally tantamount to gambling and could be subject to Nevada gaming law. At the time of the agreement, the Ninth Circuit had not decided whether to grant further review, and Robinhood had separately asked the U.S. Supreme Court to review the panel decision.