Kalshi, a prediction market platform, has taken legal action against the Nevada Gaming Control Board and the New Jersey Division of Gaming Enforcement following cease-and-desist letters from both regulators. The letters demanded that Kalshi halt all sports-related contracts in the respective states, alleging unauthorized sports wagering operations.
Kalshi argues that its event contracts, which allow users to wager on the outcome of different events, fall under the jurisdiction of the federal Commodity Futures Trading Commission (CFTC) and are therefore not subject to state regulation.
The company maintains that its platform operates as a two-sided market where participants trade contracts with each other, distinct from traditional sports betting models where the house sets odds and takes bets. Co-founder Tarek Mansour emphasized the importance of prediction markets as a technological innovation of the 21st century.
While the NGCB’s order also targeted Kalshi’s election-related contracts, a U.S. judge ruled in September 2024 that these contracts were legal, allowing them to be freely traded across the country.
On February 4, the CFTC announced a shift in regulatory focus towards fraud prevention, marking a positive development for industry firms that had faced increased scrutiny under the Biden administration. The agency launched a probe into Super Bowl event contracts by Kalshi and Crypto.com but ultimately took no action against them.
Kalshi is prepared to defend its innovative technology in court against state regulators and position itself as a pioneer in the prediction market space.
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