Kalshi vs. the States, a battle over betting or business

Guys, grab your popcorn because this legal drama is heating up! Prediction market platform Kalshi has stepped into the ring, suing gaming regulators in Nevada and New Jersey after receiving cease-and-desist orders to halt its sports-related contracts in both states.

And let me tell you, this isn’t just another squabble over gambling, it’s a showdown over who gets to call the shots on innovation.

Betting or business?

Nevada’s Gaming Control Board kicked things off on March 4, claiming Kalshi’s event-based contracts are essentially unlicensed sports betting pools.

New Jersey’s Division of Gaming Enforcement followed suit on March 27, accusing the company of violating state sports wagering laws.

Both states seem to think Kalshi is running a rogue sportsbook. But Kalshi? Oh, they’re not having it.

The company argues that their contracts aren’t gambling, but they’re federally regulated derivatives under the Commodity Futures Trading Commission.

In Kalshi’s world, these contracts are like swaps, not bets controlled by the house.

It’s finance, not fun and games. As co-founder Tarek Mansour put it, it’s something entirely new.

“Prediction markets are a critical innovation of the 21st century… initially misunderstood.”

A federal shield?

Kalshi’s legal team isn’t pulling punches. They claim federal law, the Commodity Exchange Act trumps state regulations. In other words, Nevada and New Jersey can’t touch them.

It’s like telling your nosy neighbor to stay out of your business because Uncle Sam already gave you permission. Bold move, Kalshi.

Interestingly, this isn’t their first fight with regulators. Nevada also tried to block Kalshi’s election contracts last year, but a U.S. judge ruled them legal in September 2024.

So, while the states are swinging hard, Kalshi’s got some wins under its belt.

CFTC, a breath of fresh air?

Meanwhile, over at the CFTC, there’s been a shift in tone. Acting director Caroline Pham announced in February that the agency is ditching its regulation by enforcement approach to focus on fraud prevention instead. Industry players welcomed this change like a sunny day after months of rain.

But don’t think the CFTC is sitting idle. They’ve been poking around Kalshi’s Super Bowl contracts too, making sure everything complies with derivatives laws.

So far? No bans, no drama. It seems like the feds are playing it cool while the states are throwing punches.

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