A Judge Told Kalshi That Standstills Were Killing Its Case. Three Weeks Later It Signed Another One

On September 17, KalshiEX LLC and the state of Montana filed a joint stipulation in the U.S. District Court for the District of Montana that ends Kalshi's lawsuit against the state's gambling regulators. Montana's side agreed not to commence, pursue, or refer for prosecution any civil or criminal enforcement action over Kalshi's event contracts. The pause runs until the later of two events: the Ninth Circuit denying Kalshi's petition for rehearing en banc, or the Ninth Circuit issuing an en banc decision in KalshiEX LLC v. Assad.

Read quickly, that is a win. Kalshi walks out of a hostile district court with the enforcement threat suspended and its claims preserved.

Read against the docket it came from, it is something stranger: Kalshi signed the same kind of agreement that a federal judge had told it, three weeks earlier, was destroying its ability to win.

What Judge Molloy actually said

On August 27, Judge Donald W. Molloy denied Kalshi's motion for a preliminary injunction against Montana. The reasoning was not about preemption, or swaps, or the Commodity Exchange Act. It was about Kalshi's own conduct.

Kalshi could not show that irreparable harm was "not just possible but likely," Molloy wrote, and the reason it could not was the history of the case: "Kalshi's repeated agreement to stay this matter for months at a time fatally undermines its ability to make such a showing."

That sentence is the most important thing any court has said to Kalshi this year, and almost nobody covered it, because it is not about the big constitutional question everyone is waiting on. It is about litigation behaviour. A company that keeps agreeing to pause a fight is telling the court the fight is not urgent. Molloy denied the motion without prejudice — Kalshi can come back — but the finding stands on the record.

Three weeks and three weeks only separate that ruling from the September 17 stipulation, in which Kalshi agreed to pause the matter again.

The first deal, and how it ended

This is not a hypothetical worry about what standstills cost. Montana and Kalshi have run this exact play once already, and it ended with the state walking away.

Montana's Gambling Control Division sent Kalshi a cease-and-desist in March 2025. The parties then reached an understanding, memorialised in an email from Kalshi attorney Will Havemann and later attached as an exhibit to Kalshi's complaint: Montana authorities would "preserve the status quo and not initiate any civil or criminal enforcement against Kalshi during the pendency of the Nevada litigation."

That held for about a year. In November 2025, the Nevada injunction that the deal referenced was dissolved. On April 9, 2026, Jeremy S. Craft of Montana's Department of Justice sent a second cease-and-desist. Montana's position was that the standstill had been premised on the Nevada injunction remaining in force; once it was gone, so was the agreement. Kalshi's lawyers told the court the April letter meant their client "may face criminal prosecution in Montana for offering its event contracts," and sued.

So the structure of the new deal deserves attention, because it is the same structure. The pause is again tied to an external proceeding Kalshi does not control — this time the Ninth Circuit's handling of the en banc petition it filed on September 9 — and it again expires by its own terms on a contingency, rather than resolving anything. Montana is reported to owe Kalshi 30 days' written notice before resuming. Thirty days is not a settlement. It is a notice period.

The defendant who matters was not fully released

The dismissal is split, and the split runs the wrong way for Kalshi.

The action was dismissed with prejudice as to five commission defendants — Tony Harbaugh, Jon Metropoulos, Steve Morris, Leo Prigge and Janna Taylor. It was dismissed without prejudice as to Attorney General Austin Knudsen, Alex Sterhan, and the Montana Gambling Control Division.

Kalshi permanently gave up its claims against the five individuals with the least capacity to hurt it, and preserved claims against the three with the most. That is defensible on its own. The part that is harder to square is the reported carve-out: Knudsen retains the authority to initiate or pursue enforcement against Kalshi in his own right.

We want to be careful here, because this is exactly the kind of procedural detail this desk has been burned on. We did not read the stipulation. We are working from reporting on it, and the reporting is not perfectly consistent — some accounts describe a flat non-enforcement promise by "Montana," while the more granular account describes the promise as binding the regulator defendants while preserving the attorney general's independent prosecutorial discretion. Those are materially different documents. If the second reading is right, Kalshi has bought quiet from the officials who issue cease-and-desist letters while leaving untouched the official who files criminal charges. If the first reading is right, our criticism is much weaker and we will say so.

The counterargument, which is good

The strongest case for Kalshi's lawyers goes like this. They lost the preliminary-injunction motion. Continuing to litigate in front of a judge who has already written that your harm is not imminent is spending money to build an unhelpful record. Meanwhile the entire question — whether the Commodity Exchange Act preempts state gaming law as applied to these contracts — is sitting in front of the Ninth Circuit en banc, where it will be decided for the whole circuit regardless of what happens in Missoula. Taking non-enforcement in exchange for a dismissal that preserves your claims against the defendants who matter is not capitulation. It is triage, and it is what a competent litigator does.

That is right as far as it goes, and it is why we are not calling this a defeat.

Here is where it stops going. Molloy's finding was not that Kalshi's claims were weak; it was that Kalshi's own repeated pauses proved the absence of urgency. The remedy for that finding is to stop pausing. Every additional standstill makes the next irreparable-harm showing harder, in Montana and anywhere else a judge reads the docket. Kalshi is running an argument in public — that state enforcement is an existential, immediate threat to a federally licensed exchange — while running an argument in court, by conduct, that it can comfortably wait. Those cannot both be true forever, and a judge has now written down which one the record supports.

What this says about the map

Missouri's Attorney General Catherine Hanaway sent cease-and-desist letters to six operators on September 18 with a 30-day compliance window, and told a local station she expects to be sued. Montana, one day earlier, agreed to stand down. Those two states have not received different law. The Ninth Circuit's August 28 panel decision — holding that the contracts "were not 'swaps' because they were sports bets," a conclusion the CFTC publicly called an "atextual exception" to the CEA — binds Montana and does not bind Missouri, and yet it is Montana that stopped enforcing and Missouri that started.

The variable is not doctrine. It is appetite. Montana already won the only ruling it needed and has no reason to spend another year on a case that the Ninth Circuit is about to moot in one direction or the other. Missouri has a fresh voter-approved wagering framework, a new attorney general, and every political reason to be first.

Anyone treating the state-by-state map as a legal scoreboard is reading it wrong. Right now it is a map of who wants the fight.

What would change our mind

If the en banc petition is granted and the panel opinion is vacated, Kalshi's decision to conserve resources and avoid an adverse district-court record looks correct and this column looks like it over-read a procedural filing. If the petition is denied and Montana gives its 30 days' notice, Kalshi will be back in front of Molloy asking for an injunction, and the judge will be looking at a docket with one more standstill on it than the last time he said no.

Editor's note: TrueEdge builds odds and pricing tools and earns affiliate commissions from sportsbook partners. We have argued in this column against criminalising federally licensed exchanges, and that position is not neutral with respect to our business. Readers should weigh it accordingly.